The Federal Deposit Insurance Corporation (FDIC) has provided deposit insurance
coverage to depositors of insured banks since 1933. This protection is important to
all investors, especially those who tend to be invested heavily in cash and who are
dependent on these accounts to cover living expenses.
Note: The covered institutions must display an official sign at each teller window or
teller station. All FDIC institutions should have a brochure available to answer
other questions regarding coverage. Additional information can be obtained at
Types of Deposits Protected. All types of deposits received by a financial institution
in its usual course of business are insured. For example, savings deposits, checking
deposits, Certificates of Deposit (CDs), cashier's checks, and money orders are all
covered. Certified checks, letters of credit, and traveler's checks, for which an
insured depository institution is primarily liable, are also insured when issued in
exchange for money or its equivalent, or for a charge against a deposit account.
Any person (U.S. citizen or not) or entity can have FDIC insurance coverage in an
insured bank. However, only deposits that are payable in the U.S. are covered.
Deposits only payable overseas are not insured.
Securities, mutual funds, and similar types of investments, even if purchased through
a bank, are not covered, nor are safe deposit boxes or their contents. Similarly,
treasury securities purchased by an insured institution on the customer's behalf are
not insured, but these investments are backed by the full faith and credit of the
Amount of Coverage Available. A depositor is normally insured up to $250,000 in each
insured financial institution. Accrued interest is included when calculating
insurance coverage. Deposits maintained in different categories of legal ownership
are separately insured. Accordingly, an individual can have more than $250,000 of
insurance coverage in a single institution, provided the funds are owned and
deposited in different ownership categories.
Deposits held in one insured bank are insured separately from any deposits held in
another separately insured bank. For instance, if a person has a checking account at
Bank A and has a checking account at Bank B, both accounts would be insured
separately up to $250,000. Funds deposited in separate branches of the same insured
bank are not separately insured.
Up to $250,000 in deposit insurance is provided for the money a consumer has deposited
at the same insured institution in a variety of retirement accounts, including
traditional IRAs, Roth IRAs, SEP IRAs, and SIMPLE Plans.
Maximizing FDIC Insurance Coverage. FDIC insurance coverage is not determined on a
per-account basis, but on an ownership basis. Thus, the type of account has no
bearing on the amount of insurance coverage, and the social security numbers or tax
identification numbers do not determine coverage. Instead, separate insurance
coverage is provided for funds held in different ownership categories. This means
that a bank customer who has multiple deposits may qualify for more than $250,000 in
insurance coverage if the customer's accounts are deposited in different ownership
categories and the requirements for each ownership category are met. Thus, increasing
your available FDIC coverage may be as simple as retitling accounts so they fall into
different ownership categories.
For example, an individual with three individual accounts each worth $100,000 for a
total of $300,000 would have only $250,000 of coverage. However, a joint account
worth $500,000 would be fully covered ($250,000 per person).
This publication is distributed with the understanding that the author, publisher and
distributor are not rendering legal, accounting or other professional advice or
opinions on specific facts or matters, and, accordingly, assume no liability
whatsoever in connection with its use. The information contained in this newsletter
was not intended or written to be used and cannot be used for the purpose of (1)
avoiding tax-related penalties prescribed by the Internal Revenue Code or (2)
promoting or marketing any tax-related matter addressed herein. © 2015