What Is Covered by FDIC Insurance?

FDIC insurance protects your eligible deposits up to $250,000 per depositor, per insured bank for each account category in the event that your bank fails. This coverage automatically kicks in if your account falls under the Federal Deposit Insurance Corp. umbrella.

FDIC insurance covers an array of accounts and products at insured banks, including:

• Checking accounts
• Savings accounts, including high-yield savings accounts
• Certificates of deposit (CDs)
• Money market accounts
• Cashier’s checks
• Money orders
• Negotiable order of withdrawal (NOW) accounts

FDIC Coverage Limits

FDIC insurance covers deposits up to $250,000 per depositor, per FDIC-insured bank in each ownership category. The coverage amount is determined by the FDIC ownership category, which is the way a bank holds deposits. These categories for consumers and non-government entities include:

• Single accounts: Deposit accounts owned by one person without named beneficiaries, insured up to $250,000.
• Joint accounts: Deposit accounts owned by two or more living people without named beneficiaries, insured up to $250,000 per co-owner.
• Certain investment accounts: Self-directed IRAs, 401(k) plans, and other eligible retirement accounts, insured up to $250,000.
• Revocable trust accounts: Accounts with named beneficiaries, insured up to $250,000 per beneficiary.
• Irrevocable trust accounts: Accounts opened in connection with an irrevocable trust, typically insured for a maximum of $250,000.
• Corporate, partnership, or unincorporated association accounts: Deposits owned by corporations, partnerships, and unincorporated associations, insured up to $250,000.

What Happens to Deposits Over $250,000?

Bank deposits over the coverage limits might not be FDIC-insured. For example, if you are a single account owner and your bank goes out of business, you could recoup as much as $250,000 from your checking and savings accounts at that bank. If your combined deposits at the bank were $300,000, you might not be covered for $50,000 of that total.

For joint accounts, the insurance is up to $250,000 per depositor. So, if you and your spouse have $600,000 in joint savings accounts at one bank, you might consider splitting the $600,000 between accounts at two different banks to ensure all your money is insured.

What Happens When a Bank Fails?

When a bank fails, the FDIC, an independent federal agency, finds a buyer for the bank’s remaining assets or pays the bank deposits directly to eligible account holders. A bank fails when it can’t honor financial commitments to account holders and others.

Most, but not all, banks are insured by the FDIC. To find out whether your bank is insured, use the FDIC’s BankFind tool. Note that FDIC insurance doesn’t apply to credit unions. Instead, the National Credit Union Administration (NCUA) provides similar coverage limits for credit unions.

The Bottom Line

FDIC insurance protects the deposits of millions of bank customers in the U.S. While bank customers are often safely within FDIC insurance limits, it’s wise to distribute your deposits among more than one insured bank if your accounts hold more than the maximum coverage amount.

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