Bank failures are back in the news. There have been a few runs on banks in the last few weeks as panicked depositors withdraw money from troubled banks. But FDIC insures bank accounts and no depositor has lost money since the FDIC was founded.
History of FDIC Insurance
Federal Deposit Insurance Corporation (FDIC) agency was created in 1933 to prevent the kind of bank runs that happened during the Great Depression. President Franklin Roosevelt signed the Banking Act of 1933 which established the FDIC.
FDIC’s mission is to maintain stability and public condense in the country’s financial system. FDIC insures deposits, examines and supervises financial institutions for safety, soundness, and consumer protection, and manages receiverships.
How is the FDIC funded?
FDIC is funded by the premiums banks pay for deposit insurance coverage. It receives no money from Congress. Since its founding on Jan 1, 1934, deposits have not lost a penny of their money when banks failed.
How do you know if your funds are insured?
FDIC insurance depends on 2 things 1) whether your bank is FDIC-insured, and 2) whether the product in question is a deposit product. Not all accounts at a bank are protected by FDIC.
What the FDIC covers and what it doesn’t
FDIC covers
- Checking accounts
- Negotiable Order of Withdrawal (NOW) accounts
- Savings accounts
- Money Market Deposit Accounts (MMDAs)
- Time deposits such as certificates of deposit (CDs)
- Cashier’s checks, money orders, and other official items issued by a bank
FDIC doesn’t cover
- Stock investments
- Bond investments
- Mutual funds
- Crypto Assets
- Life insurance policies
- Annuities
- Municipal securities
- Safe deposit boxes or their contents
- U.S. Treasury bills, bonds, or notes
FDIC insurance amount limits
FDIC insurance amount limit is $250,000
- per depositor
- per insured bank
- per account category
Ownership categories
There are 14 FDIC deposit insurance ownership categories
- Single accounts
- Joint accounts
- Revocable trust accounts
- Irrevocable trust accounts
- Certain retirement accounts
- Employee benefit plan accounts
- Business/Organization accounts
- Government accounts (public unit accounts)
- Mortgage servicing accounts for principal and interest payments
- Accounts held by a depository institution as the trustee of an irrevocable trust
- Annuity contract accounts
- Public bond accounts
- Custodian accounts for Native Americans
- Accounts deposited by an IDI pursuant to the Bank Deposit Financial Assistance Program of the Department of Energy
FDIC calculator
To make things easier for consumers, FDIC has a website where you can check if your money is insured. For each bank, you have an account with, the FDIC calculator calculates how much of your money is insured. You have to do this separately for each bank account you have.
Example showing how FDIC insurance works
Single accounts
If a person owns a checking account with $200,000 and a saving account with $100,000 at the same bank. Only, $250,000 is protected by FDIC insurance. The $50,000 that’s over the FDIC limit is not protected.
If a person owns accounts in different branches of the same account, only a total of $250,000 is protected.
Joint accounts
Let’s say that you and your spouse have a joint checking account with a balance of $300,000. Your account would be protected by FDIC insurance because it’s less than the $500,000 limit for joint accounts ($250,000 per depositor. In this case, there are two depositors).
Ownership category
As listed above, you are protected up to $250,000 in each of the 14 ownership categories. If you have a single account, a joint account, a business account, an annuity account, and a revocable trust, you will be protected by up to $250,000 per account holder in each of these accounts.
Bottom Line
FDIC insurance protects your money for up to $250,000 per depositor, per insured category, and per bank. You can strategically spread your money around to take advantage of the FDIC insurance, which gives you peace of mind that your money is safe even if the bank fails.