FDIC Insurance: Protecting Your Investments

The Federal Deposit Insurance Corporation (FDIC) is an independent agency of the United States government created in 1933 in response to widespread bank failures during the Great Depression. Its primary mission is to maintain stability and public confidence in the nation’s financial system by insuring deposits in banks and thrift institutions.

What Does FDIC Insurance Cover?

FDIC insurance protects depositors against the loss of their insured deposits if an FDIC-insured bank or thrift fails. This means that if your bank closes, the FDIC will reimburse you for the amount of your insured deposits, up to the coverage limit. This coverage limit is currently $250,000 per depositor, per insured bank, for each account ownership category.

FDIC insurance covers a wide range of deposit accounts, including:

• Checking accounts
• Savings accounts
• Money market deposit accounts (MMDAs)
• Certificates of deposit (CDs)
• Negotiable Order of Withdrawal (NOW) accounts

However, it’s important to note that FDIC insurance does not cover:

• Stocks
• Bonds
• Mutual funds
• Life insurance policies
• Annuities
• Cryptocurrencies
• Safe deposit boxes or their contents

Understanding Account Ownership Categories

The $250,000 insurance limit applies per depositor, per insured bank, for each account ownership category. This means you can potentially have more than $250,000 insured at the same bank if your deposits are held in different ownership categories. Common ownership categories include:

• Single Accounts: Accounts held in one person’s name.
• Joint Accounts: Accounts held in the names of two or more people. Each co-owner is insured up to $250,000 for their share of the joint account.
• Revocable Trust Accounts: Trust accounts where the grantor (creator of the trust) has the power to revoke or change the trust.
• Irrevocable Trust Accounts: Trust accounts that cannot be changed or revoked by the grantor.
• Retirement Accounts: Certain retirement accounts, like IRAs and 401(k)s, are insured separately.

How to Ensure Your Deposits are Fully Insured

To maximize your FDIC coverage, consider the following:

• Keep your deposits at or below the $250,000 limit per ownership category per bank.
• Use multiple banks if you have deposits exceeding the limit.
• Understand the different account ownership categories and how they affect your coverage.
• Confirm that your bank is FDIC-insured. You can check this on the FDIC’s website (fdic.gov) or by looking for the FDIC sign at your bank.

By understanding FDIC insurance, you can protect your hard-earned savings and investments from potential losses due to bank failures. It’s a crucial safety net that helps maintain confidence in the stability of the American banking system.