FDIC Insurance: What is it and what does it cover?

Bank failures — like the recent one collapse of Silicon Valley Bank– can be scary, increasing the likelihood of losing your savings overnight. Fortunately, thanks to the Federal Deposit Insurance Corporation, you probably don’t have to worry.

This entity, created by Congress in 1933 after a series of bank runs that helped fuel the Great Depression, aims to protect the assets of middle-class depositors. The idea is that by assuring depositors that their money is safe, the government can prevent the sort of panicked withdrawal race that can otherwise sink even healthy banks.

While the FDIC officially only covers up to $250,000 in deposits, luckily there are easy (and perfectly legal) ways to multiply that amountso all your savings are FDIC protected.

The result: If the news about Silicon Valley Bank—or Signature bank, which has also recently been in trouble – are you wondering whether to take money from your own bank, feel free. The answer is almost certainly no.

Read on to find out how the FDIC works and exactly what is covered.

What is FDIC Insurance?

The Federal Deposit Insurance Corporation is a federal regulator funded by deposit insurance premiums paid by member banks. The FDIC monitors the financial health of banks and makes sure they comply with consumer protection and lending laws. But its best-publicized function is right in the name—providing a safeguard for depositors in the event of an emergency bank failure.

The deposit insurance it offers kicks in to bail out customers (up to certain limits, usually $250,000) in the unlikely event of a bank failure. FDIC insurance coverage is automatic as long as your money is held in an account at an FDIC member bank – you don’t need to apply for it.

FDIC Insurance Coverage Limits

If you have checking, savings or other deposit account, the FDIC insurance limit is $250,000. For most bank customers, this is more than enough, but there are a few caveats about FDIC coverage that you should keep in mind.

The deposit coverage limit is per bank, per depositor and per ‘property category’. Classes of ownership categories include separate and joint accounts, various types of trust accounts, corporate and government accounts, and some benefit and retirement accounts.

All this means is that it is possible for a person to get coverage well over $250,000. If you have $250,000 in two separate savings accounts at two different banks, all $500,000 must be fully covered. However, if you have $500,000 split between a checking account and a savings account at one bank, chances are you’ll only be covered up to $250,000.

One way to increase your coverage limits without dealing with multiple banks: If you have a savings account in your name and a joint account that you share with your spouse, your family will be covered up to $750,000. That’s because The FDIC views joint accounts as a different “ownership category” than single accounts and also insures them up to $250,000 per depositor. You can use the FDIC Electronic Deposit Guarantee Estimator tool online to plug in your specific circumstances and find out how much coverage you would have.

One more tip to make sure you’re protected: Look beyond your bank’s branding, especially if you have a high-yield savings account or CD.

Many digital banks are actually brands of traditional banks. For example, BrioDirect is the digital brand of Webster Bank and UFB Direct is a brand of Axos Bank. Although these digital banks are FDIC insured, if you have deposits in an account at both the online brand and brick-and-mortar parent, they may be subject to the same FDIC coverage limit of $250,000.

If you are unsure, you can check the name of the FDIC member bank for your account by using the FDIC BankFind tool.

You should also do due diligence on FDIC insurance of your deposits if you choose to hold money with a non-bank fintech company. Although many of these neobanks partner with FDIC member banks to offer deposit coverage, the FDIC says savers to be cautious. Make sure you understand the terms under which your money is insured, including how, when and where your money is deposited with the firm’s FDIC member bank partner.

What does FDIC insurance cover?

FDIC insurance covers what we tend to think of as everyday bank accounts — specifically checking and savings accounts, both interest-bearing and non-interest-bearing. FDIC insurance also covers other types of deposit products, including money market deposit accounts and CDs.

Deposit insurance does not cover stocks or bonds (including municipal bonds), mutual funds, life insurance, annuities or crypto assets, although your interests may be covered by a different type of insurance. FDIC insurance also does not cover U.S. government bonds, although the agency notes on its website that these instruments are backed by the U.S. government, which is why they are considered safe investments around the world.

Here is a brief description:

Are money market accounts FDIC insured?

FDIC coverage includes money market deposit accountsalthough it does not cover money market mutual funds that you buy through a broker.

Are CDs FDIC Insured?

Certificates of Deposit are FDIC insured, subject to general coverage limits. The exception to this rule is mediated CDs: These products are purchased through brokers, which places them outside the scope of FDIC coverage.

Are credit unions FDIC insured?

FDIC insurance does not cover deposits held in credit unionsbut there is a parallel agency, the National Credit Union Administration, which offers equivalent deposit insurance—with the same $250,000 limit as the FDIC’s insured amount—on accounts and certificates held by credit union members.

If you are comparing NCUA vs. FDIC, you really won’t find a difference from a customer perspective. Like FDIC insurance, you get automatic NCUA insurance coverage if you bank with a member institution.

Are brokerage accounts FDIC insured?

Investment products such as stocks, bonds (including municipal bonds) and mutual funds are not covered by FDIC insurance. If you have a brokerage account and it loses value, that’s a risk you should be prepared to expect as an investor.

The Securities Investor Protection Corporationan independent organization for broker-dealers, offers coverage for lost money and securities if you have brokerage account in a SIPC member company that fails. The coverage limit is up to $500,000 per customer, per institution (this limit remains in effect even if you have multiple accounts with the same brokerage), including a $250,000 maximum cash coverage.

Are crypto exchange accounts FDIC insured?

Since the FDIC does not insure any non-bank assets, cryptocurrency is not covered by the agency’s deposit insurance. It also does not protect users from losses they may incur as a result of fraud or theft.

The cryptocurrency market operates in a regulatory gray area, and consumers don’t get the kind of protection they would if they kept cash in a bank or credit union. Cryptocurrency exchanges, brokers, custodians, and wallet providers are outside the scope of FDIC oversight and coverage.

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