The Federal Deposit Insurance Corporation (FDIC) is an organization that guarantees certain types of bank accounts in the United States. Some investments such as mutual funds, stocks, and life insurance policies are not insured at all, and other investment accounts are covered based on a number of FDIC limits. These limits can get complicated, though the general rule of thumb is that the FDIC insures $250,000 US Dollars (USD) per insured banking institution and per account category. This means that an individual can have two or more fully insured accounts at one bank, so long as each one is a different type of account. Some of the basic account types covered by the FDIC include single, joint, revocable trust, and some retirement accounts, including Individual Retirement Accounts (IRAs).
For the purposes of determining FDIC limits, categories do not refer account types like checking, savings, and certificates of deposit (CDs). As far as the FDIC is concerned, a checking account and a savings account are functionally identical. Insurance coverage is instead determined based on ownership, with each person typically being allowed to have $250,000 USD worth of coverage across all individual accounts at one bank, regardless of whether they are savings, checking, or otherwise.
Each account category is typically considered separately when determining FDIC limits. One person can not have two individual accounts at one bank that are both worth $250,000 USD and expect them to be covered, though that same person could have an individual account, a joint account, be part of a trust, and seek coverage protection of $250,000 USD per account category. In the case of joint and trust accounts, each owner may be insured for $250,000 USD, allowing the account to be worth $500,000 USD or more.
Certain retirement accounts and revocable trusts may be subject to other restrictions, and FDIC limits may also be affected by an account having beneficiaries. While the basic principles behind FDIC limits are relatively simple, there are a number of exceptions and special cases. There are even certain types of non-interest bearing accounts that have no insurance limits at all.
Though it is possible to determine whether or not an investment is covered within the FDIC limits without outside help, it may be wise to retain the services of a financial planner. The FDIC also offers an automated service on their website to help determine whether an individual's accounts exceed the FDIC limits. Seeking outside help from a financial planner, accountant, or the FDIC itself can help insure that money is not accidentally left in uninsured accounts.
FAQ on FDIC Limits
How much money is insured by the FDIC per bank account?
According to the Federal Deposit Insurance Corporation (FDIC), an individual bank account is insured up to $250,000 per depositor, per insured bank, for each account ownership category. This means that if you have a single account, your funds are protected up to the $250,000 limit. However, if you have multiple accounts in different ownership categories, you may be eligible for more than $250,000 in coverage. For more details, visit the FDIC's official website at https://www.fdic.gov/resources/deposit-insurance/.
Can I increase my FDIC insurance coverage beyond $250,000 at one bank?
Yes, you can increase your FDIC insurance coverage beyond $250,000 at one bank by setting up accounts in different ownership categories. For example, individual accounts, joint accounts, retirement accounts, and trust accounts are each insured up to $250,000. By diversifying your accounts across these categories, you can significantly increase your total coverage at a single bank. Detailed information on ownership categories can be found on the FDIC's website.
Are business accounts covered by the FDIC?
Business accounts are indeed covered by the FDIC, with the same $250,000 insurance limit applying to business deposits. However, this coverage is per business entity, not per individual account. Therefore, if a business has multiple accounts at the same insured bank, the total coverage is still capped at $250,000, regardless of the number of accounts. For more specifics on business account coverage, refer to the FDIC's guide for business owners.
What happens if I have more than $250,000 in one account type at a bank?
If you have more than $250,000 in one account type at a bank, the amount exceeding the insurance limit is not covered by the FDIC. In the event of a bank failure, you could lose the funds above the insured limit. To mitigate this risk, consider spreading your funds across different banks or opening different types of accounts at the same bank to maximize FDIC coverage. Always consult with a financial advisor or the FDIC for personalized advice.
Does the FDIC insure investment products like stocks and bonds?
The FDIC does not insure investment products such as stocks, bonds, mutual funds, life insurance policies, annuities, or securities. The FDIC's insurance coverage is strictly for deposit accounts, including checking accounts, savings accounts, money market deposit accounts, and certificates of deposit (CDs). Investment risks associated with non-deposit products must be managed separately, often through other types of insurance or investment protection plans. For clarification on what is covered, visit the FDIC's consumer protection page.