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Know Your Limits
How Much of your Bank Account is Covered by FDIC Insurance?

Frank L. Festi, Jr.
Jul 23, 2008

With the failure of IndyMac bank, it is a good time to review the limits of bank assets that are covered by FDIC (Federal Deposit Insurance Corp.).

According to FDIC.gov:

• FDIC insurance covers all types of deposits received at an insured bank, including deposits in checking, NOW, and savings accounts, money market deposit accounts and time deposits such as certificates of deposit (CDs).
• 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.
• The FDIC does not insure money invested in stocks, bonds, mutual funds, life insurance policies, annuities or municipal securities, even if these investments were bought from an insured bank.
• The FDIC does not insure U.S. Treasury bills, bonds, or notes. These are backed by the full faith and credit of theUnited Statesgovernment.
• The basic insurance amount is $100,000 per depositor, per insured bank.

The $100,000 amount applies to all depositors of an insured bank except for owners of certain retirement accounts, which are insured up to $250,000 per owner, per insured bank.

By maintaining deposits in different categories of legal ownership at the same bank, it is possible to have deposits of more than $100,000 at one insured bank and still be fully insured. By holding assets in the four ownership categories (individual account, joint account, certain trust accounts, and certain retirement accounts), it is possible to significantly increase your FDIC Insurance coverage.

For example, a married couple is able to insure more than $1 million by properly allocating their assets. Each spouse can have an individual account of up to $100,000. Joint accounts provide $100,000 coverage for each spouse for a maximum coverage of $200,000 per joint account. Each spouse can have a trust account like a “Payable-on-Death” (POD), where they name the other spouse the beneficiary and be insured for up to $100,000 (POD’s are insured up to $100,000 per Beneficiary). Finally, each spouse can have individual retirement accounts (IRA’s) that are insured up to $250,000 per spouse. Therefore, by utilizing different legal ownership accounts, they are able to insure up to $1.1 million at each insured bank.

If you have deposits in separate branches of an insured bank, be aware that they are not separately insured. Deposits in one insured bank are insured separately from deposits in another insured bank.

For more information, visit the FDIC’s website at www.fdic.gov or call toll free at: 1-877-ASK-FDIC (1-877-275-3342).

Portions of this article were taken from www.fdic.gov.

This article was originally published in Illuminations: Facts & Figures from people with a brighter way, a Rea & Associates enewsletter, July 23, 2008 issue.

NOTE: This content is accurate as of the date published above and is subject to change. Please seek professional advice before acting on any matter contained in this article.

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