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Is your checking account fully insured? 3 steps to make sure your money is safe

November 23, 2010

By Barbara Marquand | Money Rates Columnist

The American Bankers Association projects the Dodd-Frank Wall Street Reform and Consumer Protect Act will result in more than 500 pages of new regulations for traditional banks.

Thankfully, unless you're a banker, you don't need to know what's on every one of those pages, but there's one change you should definitely understand -- the increase in insurance coverage for your money in CDs and savings accounts, money market accounts and checking accounts.

Among other things, the financial regulatory reform act, signed into law in July, permanently raised the FDIC insurance coverage limit to $250,000 per depositor, per institution for each account ownership category.

Before the financial meltdown in 2008, the standard maximum insurance amount was $100,000. Congress raised that limit temporarily to $250,000 through Dec. 31, 2010, then extended the temporary increase through Dec. 31, 2013. Now, under the new law, the limit is at $250,000 permanently. That means if your bank fails, your money is safe, as long as the amount is within the coverage limit.

(Deposits at credit unions are also insured up to $250,000 per person per institution, but through the National Credit Union Administration, rather than the FDIC.)

Here are three steps you should take to ensure that your bank deposits are covered:

1. Understand FDIC coverage

You can have more than $250,000 insured at one institution if the money is in different ownership categories and no more than $250,000 is deposited in each category. Ownership categories include:

• Single accounts, which are in your name only with no beneficiaries

• Joint accounts, which are owned by two or more people and titled jointly with no beneficiaries

• Revocable trust accounts, which are held as payable-on-death accounts or in-trust-for accounts, or that are established in the name of a living or family trust account.

• Certain retirement accounts, such as IRAs, Section 457 deferred compensation plan accounts, self-directed defined contribution plans and self-directed Keogh plans.

2. Double-check your coverage

Use the FDIC's Electronic Deposit Insurance Estimator, known as EDIE, to confirm all your deposits are covered at your banks or savings and loans. The tool lets you enter the types of accounts you own, the accountholders' names and the account balances at a particular institution, then calculates whether all your money is insured. Anytime you're unsure about coverage, call the FDIC to clear things up.

3. Review coverage after major changes

The death of a spouse, a large windfall or a big inheritance can put you over the FDIC coverage limit. If you and your spouse own a joint checking account of $400,000, for instance, the entire amount would be insured because each person's share of $200,000 would fall within the $250,000 coverage limit. But if your spouse died, the entire $400,000 would be under your name only, and $150,000 would be left uninsured. The FDIC gives you a grace period of six months after the death of a joint owner or account beneficiary to make the necessary changes to get full insurance coverage.

What if you're over the coverage limit? Move money to other institutions or maximize coverage by dividing money into different ownership categories. The latter can have estate planning consequences, though, so the FDIC recommends consulting with an attorney or financial advisor to decide the best course of action.

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