Winter 2007/2008

Know Your Limits: Why, When and How to Be Sure You're Fully Protected by FDIC Insurance

A deposit in an FDIC-insured bank or savings institution is one of the safest ways to protect your money. Bank failures are uncommon (only three banks failed in 2007). Also, the overwhelming majority of depositors have accounts that are fully within the FDIC's insurance limits. However, "if a bank fails, any deposits that exceed the FDIC's insurance limits are not protected by FDIC insurance," said Kathleen Nagle, Associate Director of the FDIC's Consumer Protection Branch. "That's why it's important for consumers to be aware of their insurance coverage and how they might ensure that their deposits are fully protected."

Here are some basic points to remember.

If you (or your family) have $100,000 or less in all of your deposit accounts at the same insured bank, you don't need to worry about your insurance coverage. Your deposits are fully protected under federal law and FDIC rules because the basic insurance coverage is $100,000 per depositor per insured institution.

You may qualify for more than $100,000 in coverage at one insured bank if you own deposit accounts in different "ownership categories." For example, let's say you have three accounts at one bank. Two of the accounts you own by yourself – a savings account totaling $65,000 and a checking account with a balance of $9,000. The third account is a $180,000 certificate of deposit (CD) that you own jointly with another person, and your share is presumed to be half ($90,000) unless specified otherwise. Because the checking and savings accounts are both held in the single-account category (that is, owned by one person), they are added together for insurance purposes and the total ($74,000) is fully insured since it is under the $100,000 FDIC limit for single accounts. Because the CD is a joint account (a different ownership category), your $90,000 share is fully insured, separately from your single accounts. So, even though you have $164,000 in deposits at one bank, all of it would be fully insured by the FDIC.

In addition, FDIC rules for some ownership categories allow you to hold more than $100,000 in one account and still be fully insured. For example, certain retirement accounts are insured up to $250,000 per owner per bank. And, the owner of one or more revocable trust accounts – a category of deposits intended to pass along to named beneficiaries upon the owner's death – can be insured up to $100,000 for the actual interests of each qualifying beneficiary if certain requirements are met. That would mean all the revocable trust accounts you have in one insured bank could be insured for as much as $200,000 if there were two qualifying beneficiaries, $300,000 if there were three, and so on. The rules for coverage of revocable trust deposits, which include payable-on-death accounts and living trust accounts, are very specific. For more information, check with the FDIC.

Periodically review your coverage if there's been a big change in your life or banking situation and you have deposits of more than $100,000 at one bank. For example, if two people have a $150,000 joint account (which is fully insured up to $200,000), and one of them dies, the survivor has six months under the FDIC's rules to restructure the account. After that, the entire account is insured as the survivor's single-ownership deposits along with any other accounts in that group, up to $100,000, thus leaving $50,000 or more over the insurance limit and at risk of loss if the bank failed.

Also review your coverage if you own accounts at two institutions that merge and the combined funds exceed $100,000. Accounts at the two institutions before the merger continue to be separately insured for six months after the merger, and longer for CDs, but you have to remember to review the accounts within the grace period to avoid a potential problem with uninsured funds.

The FDIC can help you understand and determine your insurance coverage. To learn more about how to qualify for more than $100,000 in coverage at one bank, you need to know how FDIC insurance works.

For guidance 24 hours a day, seven days a week, go to http://www.fdic.gov/deposit/deposits/index.html to find insurance brochures and videos. This site also gives you access to our interactive Electronic Deposit Insurance Estimator (EDIE), which allows users to calculate the insurance coverage of their accounts and generate a printable report that clearly states if their deposits are fully insured or not. The FDIC also responds to letters, e-mails and calls from consumers who have questions about their insurance coverage.

"We encourage anyone with a question about their FDIC insurance to check out our Web site or call us," Nagle said. See details in For More Help or Information from the FDIC