FDIC Insurance: Is your bank FDIC insured? Make Sure Your Money Is Covered - 5 must-know questions about FDIC insurance limits
Advertisements:Update (October 3, 2008): FDIC deposit insurance temporarily increased from $100,000 to $250,000 per depositor through December 31, 2009. More here
I have cash in my savings and money market account in [insert your bank name.] How secure is the bank?
100% FDIC-insured, no money lost
Recent failure of IndyMac bank, Lehman Brothers, Bear Stearns and poor health of financial system, more banks are at the risk of failure, total 25+ bank failure since 2000; (This year alone, eleven banks have gone under. See FDIC ‘troubled bank’ list) It seems “credit crunch” is really knocking my door. In such financial turmoil condition; question like; How secure is the bank? and is my money safe in bank? These questions are very valid concern for average people, like me and you.
Brief background: In 1933 US government created a FDIC (Federal Deposit Insurance Corporation) in response to the large number of bank failures during the Great Depression, and serves as a sort of safety net. FDIC provides deposit insurance which guarantees the safety of checking and savings deposits in member banks.
So, First, Is your bank FDIC insured?
This one is very easy, go to www.fdic.gov. Type “[Your bank name]” in the search blank and click the find button. If you find name of your bank in search result; it means your bank is a member of the FDIC. Thus, your checking and savings deposits are FDIC insured.
You can also find out about your banks’ FDIC membership by visiting bank website. Generally you will see FDIC sign or such text at the bottom of bank website homepage. You can also call the FDIC toll-free at: 1-877-275-3342 to verify bank’s FDIC membership.
Second, what IS NOT covered by FDIC Insure?
FDIC insurance does not cover money investment like stocks, bonds, mutual funds, life insurance policies, annuities, Treasury bills (T-bills) or municipal securities. (There is no federal insurance on Treasury securities; however, they are backed by the full faith and credit of the United States Government - the strongest guarantee you can get. T-Bills can be redeemed the security at the nearest Federal Reserve Bank anytime after maturity date) The contents of a safe deposit box are not insured by the FDIC.
Third, what IS covered by FDIC Insure and how much?
All deposits at insured banks, including checking and savings accounts, money market accounts, retirement accounts, and certificates of deposit (CDs) are covered by FDIC insure up to the insurance limit. FDIC insurance protects the first $100,000 of deposits that are payable in the United States per depositor per insured bank.
In nutshell, here is FDIC insurance limits:
- Single Accounts (owned by one person): $100,000 per owner
- Joint Accounts (two or more persons): $100,000 per co-owner (…means $200,000 in total is insured by FDIC)
- IRAs and certain other retirement accounts: $250,000 per owner
- Revocable trust accounts: Each owner is insured up to $100,000 for the interests of each beneficiary.
Example: John and Mary have three joint accounts totaling $220,000 at an insured bank. Under FDIC rules, each co-owner’s share of each joint account is considered equal unless otherwise stated in the bank’s records. John and Mary each own $110,000 in the joint account category, putting a total of $20,000 ($10,000 for each) over the insurance limit.
Table 1
| Joint Account Example | ||
| Account Title | Type of Deposit | Account Balance |
| Mary and John Smith | Checking | $45,000 |
| John or Mary Smith | Savings | $55,000 |
| Mary Smith or John Smith | CD | $120,000 |
| Total Deposits | $220,000 | |
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Table 2
| Insurance coverage for each owner is calculated as follows: | |||
| Account Holders | Ownership Share | Amount Insured | Amount Uninsured |
| John | $110,000 | $100,000 | $10,000 |
| Mary | $110,000 | $100,000 | $10,000 |
| Total | $220,000 | $200,000 | $20,000 |
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Four, How to increase Your Coverage (FDIC insure) and get around the $100,000 FDIC limits and still insured?
If you are single and do not have any retirement account, then you are out of luck. You can have first $100,000 insured by FDIC per bank. For those who are legally married and have a child can easily get around $100,000 FDIC limit and still be insured with the same bank. Below chart explains:
Example of Extended Insurance Coverage of your money with bank accounts
Five, what will happen when my bank fails?
Generally your bank will not notify you when bank goes bankrupt. But you will understand soon when your debit card declines or you don’t see bank door open during normal business days. In such scenarios, FDIC steps in and takes a role as receiver. First it will try to sell failed bank to other bank and awarded the failed bank to another bank, bank re-opens with a new name and do a business as usual. Blog post at Finance buff noted that take-over of failure bank is finished by another bank in just matter for a week and business started usual.
If FDIC couldn’t find any buyer, it will sell the institution’s assets to pay depositors and creditors. This may take few weeks to months until you see your insured money back. Since the start of the FDIC in 1934, no depositor has ever lost a penny of insured deposits.
So what lesson learned?
Never exceed FDIC insurance limits, as you may NEVER be able to get your uninsured money back.
Bonus question: What if Deposits are in US Branches of Foreign Banks? As per FDIC, Deposits in an insured branch of a foreign bank that are payable by contract in the U.S. are entitled to FDIC insurance coverage. The coverage limits are the same as for United States banks.
Reference:
The FDIC web site is www.fdic.gov
FDIC more FAQs: here
Useful tool:
EDIE the Estimator can calculate your FDIC insurance coverage for each FDIC-insured bank where you have deposit accounts. FDIC insurance calculator
Don’t miss (similar reading):
- Video tutorial on FDIC deposit insurance coverage: Must see video for all (26 minutes)
- When banks fail: My experience with an FDIC takeover
- Metropolitan Savings Bank seized, reopens as Allegheny Valley branch
- FDIC ‘troubled bank’ list
- IndyMac Bank Failure Highlights: Another FDIC Insurance Example @MyMoneyBlog.Com
- General Principles of Insurance Coverage
- Lehman Bankruptcy, Bank of America/Merrill Lynch: What Can We Learn Here? @LazyManAndMoney.com
- FDIC Insurance Q&A: Businesses, Joint Accounts, CDARS and More @MyMoneyBlog.com
Via [fivecentnickel.com, FDIC Video Tutorial, Finance Buff and MyMoneyBlog.com]
FDIC Insurance Limits- What If My Bank Fails?
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Comments
John,
Very simple, just ask: Is [you bank name] FDIC insured? You can also find about your banks’ FDIC membership by visiting bank website. You will see FDIC logo or some text, like “FDIC Insured” etc at the bottom of bank website homepage.
Good Luck!
[...] this takeover is not going to cost any of FDIC Insurance Fund. See my recent blog post about “FDIC insurance limit and strategy” to see what is insured and what is not and limits of FDIC insured [...]
[...] this takeover is not going to cost any of FDIC Insurance Fund. See my recent blog post about “FDIC insurance limit and strategy” to see what is insured and what is not and limits of FDIC insured [...]
In disaster scenarios, what’s the FDIC fine print? can they decide to pay you back over the next 99 years?
Chad,
As per FDIC website; since the start of the FDIC in 1934, no depositor has ever lost a penny of insured deposits. However, time frame for pay back might be different from bank to bank. But generally in worst case scenario, it wont take more then few months. Hope this helps.
of the 100,000 insures is there a percentage of it that will be given back to me or is it 100 percent insured and I can count on getting the full 100,000 if my bank fails?
Holly, you will get back 100% of first $100,000 just in case if your bank fails. Anything above first 100,000 is NOT FDIC insured. However, you may get everything back but that depends on cases by case basis. In recent example, failed bank-WAMU and Wachovia customer will get everything back. Hope this is clear. Good luck.
Question?
I’ve heard where only the amount deposited is insured under the FDIC; interest or return on investment is not. In the case of an old account, deposit could be $80K while interest is $20K for a total of $100K. Is the $20K insured?
Dear Dan,
The FDIC publication “Your insured deposits” (http://tinyurl.com/fdicdeposits) explains….
“FDIC deposit insurance covers the balance of each depositor’s account, dollar-for-dollar, up to the insurance limit, including principal and any accrued interest through the date of the insured bank’s closing.”
So answer to your question is: YES. The FDIC’s insurance coverage includes principal + interest through the date of the bank failure up to the applicable insurance limit (here its $100,000)for each deposit.
Hope this helps.
[...] Don’t forget that all banks listed here are FDIC insured and cover up to $250,000 until December 2009. After December 2009 FDIC insurance limit is revert back to $100,000. See more information here about FDIC Limits and strategy for more coverage. [...]
IF MY BANK FAILS, HOW LONG WILL THE FDIC (ACCORDING TO
THEIR RULES) HAVE TO GIVE ME BACK MY MONEY ?? I’VE HAD
SEVERAL CONFLICTING “ANSWERS” TO THIS QUESTION. THANKS.
——-
Nick,
As per FDIC website; since the start of the FDIC in 1934, no depositor has ever lost a penny of insured deposits. However, time frame for pay-back might be different from bank to bank. But generally, in worst case scenario, it wont take more then few months. Hope this helps.
What questions should I ask to my bank to make sure that my money is insured by the FDIC?