Test Your Deposit Insurance IQ

How well do you understand the FDIC's deposit insurance rules? Depositors should have at least a basic knowledge of the rules, in case their bank or savings institution were to fail. But an awareness of the rules is especially important if you or your family have $100,000 or more on deposit at one insured institution. Take our 10-question quiz and find out how well-informed you are about FDIC insurance.

1. By law, all commercial banks and savings associations in the United States are insured by the FDIC.
True or false?

2. I have $100,000 in certificates of deposit (CDs) at the same banking institution where I have $100,000 in Individual Retirement Accounts (IRAs). I'm fully insured because retirement accounts are insured up to $100,000 separately from my other money at the bank.
True or false?

3. If I have accounts at two FDIC-insured institutions that merge into one, my deposits are combined immediately for insurance purposes.
True or false?

4. I have a $20,000 checking account at the same bank where I have a $100,000 trust account in my name but payable to my mother when I die. All of my money is protected because the "payable-on-death" (POD) account is insured to $100,000 separately from my checking account.
True or false?

5. I've invested in the stock and bond markets by buying shares in a mutual fund sold by my bank. Because the institution is FDIC-insured, that means my investment is protected against loss by the FDIC.
True or false?

6. My spouse and I have joint accounts totaling $200,000, but because both our names are on the accounts, they're fully insured ($100,000 for each of us)
True or false?

7. I have three accounts at the same bank-- a savings account, a checking account for myself and a separate checking account I own jointly with my mother. All three accounts are separately insured for $100,000 each.
True or false?

8. I have my checking account at the same bank where I keep the accounts of my sole proprietorship (a business owned by just one person, not by a corporation). Under the insurance rules, my sole proprietorship accounts are added together with my personal accounts I have at the bank and are insured to $100,000 in total.
True or false?

9. I have three separate joint accounts at the same bank -- one with my spouse, another with my sister and a third with my brother. Because I own each account with a different person, each account qualifies for $100,000 of insurance.
True or false?

10. I can get additional FDIC insurance by opening accounts at different branches of my institution.
True or false?

(Answers appear below.)

Answers to Our Quiz

1. False. The FDIC insures deposits in most but not all banks and savings associations. FDIC-insured institutions must display an official sign at each teller window or teller station. You also can verify whether an institution is FDIC-insured by contacting the FDIC's Division of Compliance and Consumer Affairs, as listed on the next page.

2. True.

3. False. The FDIC's rules provide "grace periods" so that any change in insurance coverage is not immediate. Regular checking and savings accounts a customer had at the acquired institution that was purchased would continue to be insured separately from deposits the customer has at the acquiring institution for six months after the merger. Also, in general, funds in CDs at each institution remain separately insured until the earliest maturity date after the six-month grace period.

4. False. Under the insurance rules, your payable-on-death accounts (also called testamentary or revocable trust accounts) are insured separately from your individual or joint accounts at the same institution only if certain conditions are met. One condition is that the beneficiary of the account must be your spouse, child, or grandchild. That means if you have a POD account and you've named your mother (or father, cousin, aunt, uncle, sibling or friend) as the beneficiary, the money in the account would be combined with your individual accounts under the same $100,000 insurance limit. On the other hand, if you have an account in trust for three children, it would be insured for up to $300,000 ($100,000 for each beneficiary), presuming they have an equal share. Again, this coverage is separate from any individual or joint accounts you or your beneficiaries have at the bank.

5. False. FDIC insurance protects only deposits. Products such as mutual funds, annuities, stocks, bonds, life insurance policies and U.S. Treasury securities are not deposits and are not protected by the FDIC. Nondeposit investments are subject to investment risks, including the possible loss of principal, even if you bought them in your bank's lobby or otherwise through an FDIC-insured institution. Although Treasury securities are not insured by the FDIC, they are backed by the full faith and credit of the U.S. government.

6. False. Joint accounts owned by the same combination of people at the same insured institution are protected for up to $100,000 total, including principal and interest. It doesn't matter how many separate accounts there are, the order in which the names appear on the accounts, or whose Social Security number is listed.

7. False. Because insurance coverage is based in part on how accounts are owned, the two accounts you have in your name alone would be added together and insured to $100,000 in total. The funds you own jointly with another person would be insured to $100,000 separately from your individual accounts. So, in this particular example, you'd be insured for up to $200,000, not $300,000.

8. True.

9. False. Figuring a person's insurance coverage for joint accounts can be tricky. Among the rules to consider is that no one person's insured interest in all joint accounts at the same institution can exceed $100,000. Let's say each of the three joint accounts had $100,000, and your total share is presumed to be half. Although you have $150,000 in the joint accounts ($50,000 for each) you're only insured for up to $100,000, leaving $50,000 uninsured. Given that, each account would not get $100,000 of insurance.

10. False. An insured institution's main office and all branch offices are considered to be one institution.

So, how'd you do on our quiz? If a little extra homework is needed, to be sure your savings are entirely
safe, you can get a copy of the FDIC booklet "Your Insured Deposits." It's available free of charge from
insured banks and savings associations as well as from the FDIC's Public Information Center. You also
can call or write the FDIC's Division of Compliance and Consumer Affairs (see the For More Help
section) to get answers to specific questions.