One of the most important things that you want to ensure when you open a checking or savings account is that your money is safe. Because of this, the FDIC offers insurance so that you are protected if a bank failure does occur.
You may be wondering, will the FDIC protect my deposits if my bank fails and what are the limits? Keep reading to learn more about FDIC insurance.
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Which Accounts Are Covered by FDIC Insurance?
A specific group of deposit accounts are insured by the FDIC:
- Checking accounts
- Savings accounts
- Negotiable Order of Withdrawal (NOW) accounts
- Money market accounts (MMAs)
- Certificates of deposit (CDs)
Additionally, the FDIC offers insurance coverage for:
- Cashier’s checks
- Money orders
- Traveler’s checks
- Accrued interest and other liabilities
As long as the institution is insured by the FDIC, your deposits are safe.
Which Accounts Are Not Covered by FDIC Insurance?
Make sure you are aware on what accounts aren’t insured by the FDIC. Assets from failed banks or other financial institutions that wouldn’t be covered include:
- Annuities
- Stocks
- Bonds
- Life insurance policies
- Mutual funds
- Municipal securities (such as municipal bonds)
- Safe deposit boxes and their contents
- U.S. Treasury bills, bonds or notes
However, U.S. Treasury bills, bonds or notes are backed by the full faith and credit of the U.S. government.
How Much is Covered Under FDIC Insurance Limits?
It is very important to know the maximum amount of money that is insured by the FDIC. Currently, the maximum amount covered by law is $250,000 per depositor.
However, this amount is applicable per bank. For instance, if you had a $250,000 CD at one bank and a $250,000 CD at another, you would be fully protected by the FDIC insurance limit.
Does Adding Owners to an Account Increase Coverage?
Another thing you may be curious about is if adding owners increases the coverage. Simply put, the ownership category does matter for how assets are covered.
For instance, if you have a $500,000 jumbo savings account, only the first $250,000 is covered. But having your spouse’s name on the account means that each gets $250,000 of coverage, so the entire account balance could then be insured (assuming that neither spouse has other deposits at the same bank).
Does Opening Different Accounts at the Same Institution Increase FDIC Insurance Coverage?
If the accounts are in a different ownership category, coverage can be increased.
- Joint accounts: Joint accounts are protected for up to $250,000 at each institution. So a married couple could keep $1,000,000 liquid and insured by dividing up the money as follows: husband’s single account: $250,000, wife’s single account: $250,000, joint account: $500,000 ($250,000 each).
- Corporate accounts: Corporate (but not sole proprietorship) accounts are treated as separate from personal accounts, meaning they have their own $250,000 limits.
- Trust accounts: Trust accounts may qualify for up to $250,000 in coverage per beneficiary if certain conditions are met.
- IRAs – Individual Retirement Agreements: IRA accounts (self-directed or traditional) are insured to a maximum of $250,000, on top of the $250,000 on other savings.
Author’s Verdict
Knowing that your money is safe is one of the most important things, and you ensure this by knowing that your bank is insured by the FDIC. Furthermore, it’s important to know the limits and the types of accounts that are insured.
In addition, we have a list of bank promotions to get some extra cash in your pockets today. You may also want to check out savings accounts if you want to get started on saving up money.
