Deposit Insurance Information
In addition to the regulations, the Banking Act of 1933 established the Federal Deposit Insurance Corporation, also known as the “FDIC.” The FDIC is an independent agency of the United States government. The FDIC protects you against the loss of your deposits if an FDIC-insured bank or savings association should fail. Since the FDIC began operation in 1934, no depositor has ever lost so much as a single penny of FDIC-insured deposits.
The FDIC insures all types of deposits in most banks and savings associations throughout the United States. The types of deposits covered by the FDIC include:
- Checking Accounts
- Savings Accounts
- Money Market Deposit Accounts
- Certificates of Deposit
In addition to offering deposit products, many banks also offer their customers a wide range of non-deposit services that are not covered by FDIC insurance. FDIC deposit insurance does not cover:
- Money Market Mutual Funds
- S. Treasury Securities
- Stocks and Bonds
- Life and Health Insurance
- Safe Deposit Box Contents
FDIC Deposit Insurance Coverage
The FDIC is backed by the full faith and credit of the U.S. Federal Government. In the event of a bank failure, the FDIC will pay all insured deposits up to the insurance limit including any principal and accrued interest.
The current standard Maximum Deposit Insurance Amount is $250,000.00. This means that if you or your family has less than this amount deposited in an FDIC-insured bank, there is no need to worry about coverage. Your deposits are fully protected.
The most important thing you should know is that if your funds are deposited in an FDIC-insured bank, and that bank should fail, the FDIC will pay all insured deposits up to the insurance limit, including principal and any accrued interest through the date of the bank closing.
Federal law requires that all insured deposits be paid as soon as possible. This usually occurs in a few business days.
Insurance Coverage and Ownership Categories
FDIC deposit insurance coverage is provided on a per-depositor, per-bank basis. What this means is that deposit accounts owned by different individuals are maintained in separately chartered banks and are separately insured.
For example, if you have $175,000.00 deposited at “Bank A” in your name alone, and you also have $110,000.00 deposited at “Bank B” in your name alone, your deposits at both Bank A and Bank B would be fully insured, because your individual deposits do not exceed the standard maximum deposit insurance amount of $250,000.00 at either bank.
It is also possible for you as a depositor to qualify for more than the standard maximum deposit insurance amount of $250,000.00, at one bank, if you have funds in different account ownership categories, such as Single and Joint, and all FDIC requirements for the category are met.
For additional details on the coverage limits, requirements, and in-depth information on all account ownership categories and other types of deposit accounts, visit the following website: www.fdic.gov/deposit/deposits.
You can also call the FDIC toll-free at 1-877-ASK-FDIC or 1-877-275-3342. You can also talk to your bank representative.
In addition to being based on a per-depositor, per-bank basis, deposit insurance coverage is also based on the account ownership category in which the funds are being held. Depositors can exceed the Standard Maximum Deposit Insurance Amount (SMDIA) of $250,000 when deposits are held in different/multiple account ownership categories and the requirements are met. Each account ownership category has specific requirements that must be met to receive the coverage under that category. The most common account ownership categories for individual and family deposits are:
- Single Accounts
- Joint Accounts
- Revocable Trust Accounts
- Self-Directed Retirement Accounts
A single account is a deposit account owned by one natural person and titled in that person’s name only, with no beneficiaries. All of your single accounts at the same insured bank are added together, and the total is insured up to the SMDIA of $250,000 per person.
A joint account is a deposit account owned by two or more natural persons with no beneficiaries. Each co-owner must have equal withdrawal rights to the account and must personally sign the account signature card. Deposit insurance coverage for joint accounts is $250,000 per depositor for the sum total of all jointly held accounts co-owned by that depositor.
Certain Retirement Accounts
A certain retirement account is a self-directed retirement account for which the owner, not a plan administrator, has the right to direct how the funds are invested, including the ability to direct that the funds be deposited at a specific FDIC-insured bank. The most common self-directed retirement accounts are Individual Retirement Accounts (IRAs), including: traditional IRAs, Roth IRAs, Simplified Employee Pension (SEP) IRAs, and Savings Incentive Match Plans for Employees (SIMPLE) IRAs.
The owner of a self-directed retirement account must be a natural person. Additionally, all deposits in this category and at the same insured bank are added together and the total is insured up to the SMDIA ($250,000 per person). The naming of a beneficiary or beneficiaries will not increase coverage.
Revocable Trust Accounts
A revocable trust account is a deposit account owned by one or more natural persons, which indicates an intention that the funds will pass to one or more named eligible beneficiaries upon the death of the owner. There are two types of revocable trust accounts, Formal and Informal:
- Informal trust accounts, such as Payable on Death (POD) and In Trust For (ITF) accounts (also known as testamentary or Totten Trust accounts) are created when the account owner signs an agreement at the bank stating that deposits will be payable to one or more beneficiaries upon the owner’s death.
- Formal trust accounts are living or family trusts created by an attorney for estate planning purposes.
In general, revocable trust accounts are insured up to $250,000 per owner for each eligible beneficiary if all of the category requirements are met.
Determining coverage for revocable trust accounts can be complicated. For additional information on deposit insurance coverage for revocable trust accounts or any of the other accounts discussed, please contact the FDIC at 1-877-275-3342.
Non-Deposit Investment Products
The FDIC does not insure non-deposit investment products such as stocks, bonds, mutual funds, and annuities.
Because the FDIC only insures funds held in deposit accounts at FDIC-insured banks, you should keep these important tips in mind when buying non-bank investment products.
Build an Emergency Fund
Have enough emergency money in a federally insured savings or other readily accessible account to support you and your family for at least six months before investing in non-deposit products.
Do Your Homework
Never invest in a product you do not understand. Attend classes, seminars, or check the business reference section of your public library to become a better informed investor. Start at www.investor.gov.
Understand the Risks
Investments always have some degree of risk. Be sure your sales representative knows your financial objectives and risk tolerance.
Pick Your Broker Carefully
Find out about your broker’s background via the Financial Industry Regulatory Authority (FINRA) BrokerCheck at the following website: www.finra.org.
You can also call the FINRA BrokerCheck Hotline at 1-800 289-9999 or contact the state securities office and Better Business Bureau.
Invest wisely online and offline. Be wary of investment scams. Make checks payable to a company or financial institution; never an individual. Take your time when making investment choices. Be careful of “act now” or “before it’s too late” statements.
Keep Good Records
Retain and maintain account statements and confirmations you receive about your investment transactions. Document all conversations with brokers.
Take Immediate Action
Take immediate action if you detect a problem. Time is critical so do not be afraid to complain.