FDIC Insurance Basics
January 17, 2009
When you deposit your money in a savings account you want to be sure it's safe. That's where the Federal Deposit Insurance Corporation comes in. The FDIC is an independent agency of the federal government that guarantees your deposits up to a certain amount. Here's how it works.
FDIC Limits
When you deposit money into a savings account make sure it's FDIC insured. The FDIC insures certificates of deposit (CDs), checking, savings, and money market accounts. The amount of all the deposits at a single institution that will be covered is $250,000. Money invested in stocks, bonds, mutual funds, annuities, and life insurance policies are not FDIC insured.
What Happens to Deposits Over $250,000?
If you have more than $250,000 in savings at a single bank, you may qualify for more coverage if you have accounts in different ownership categories. Those categories include:
- Single accounts, which are owned by one individual. This does not include retirement and qualifying trust accounts.
- Certain retirement accounts owned by one person and titled in the name of their retirement plan. That includes individual retirement accounts (IRAs), self-directed defined contribution plan accounts, and self-directed Keogh plan accounts.
- Joint accounts owned by two people. For instance, if a couple has a joint checking and joint savings at the same bank, each co-owner's shares would be added up and insured up to $250,000, giving them up to $500,000 in total coverage for both accounts.
- Revocable trust accounts that are held in payable-on-death (POD) accounts or living trust accounts.
It's important to make sure you understand how your savings accounts will be insured before signing up, so make sure you ask for all the details before depositing your money.
Look for the Sign
So how do you know if a bank qualifies for FDIC insurance? Each teller window or station where deposits are received must display a sign indicating that they are FDIC insured. You don't have to be a U.S. citizen to have your savings accounts protected.
How to Collect Insurance
If your bank fails, federal law requires that the FDIC insurance must be paid out as quickly as possible. Usually the FDIC is able to pay insurance within a few days of a bank failure. If you receive insurance, the money will either be placed in an account at another FDIC-insured bank or mailed to you in the form of a check. If you are waiting for insurance on deposits made through a broker it may take longer.
If you have uninsured deposits, you may recover them once the failed bank's assets have been sold. But keep in mind that depending upon the situation it could take years to sell a bank's assets including savings accounts.
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