5 Things You Can Do to...Protect All Your Deposits with FDIC Insurance

If you or your family have more than $100,000 at one institution, it makes sense to periodically review your coverage and, if necessary, make adjustments

Fortunately, bank failures have been rare in recent years, largely because of a strong U.S. economy and high standards that FDIC-insured institutions must meet for financial strength and stability. In the unlikely event that a bank were to fail, the FDIC would promptly pay every penny of a customer's insured deposits, including principal and interest, up to the insurance limit.

But while the overwhelming majority of depositors at failed institutions had all their funds within the federal limit, there have been customers who did not realize that some of their accounts were over the limit and uninsured. Those customers lost some or all of that excess amount (depending on how much money the FDIC recovered selling the failed institution's assets). Here's what you can do to fully protect yourself from loss by taking full advantage of FDIC insurance.

1. Remember that the basic insurance limit is $100,000 per depositor per insured bank, but you may qualify for more coverage than that. 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 because your funds are fully insured. However, it is possible to have more than $100,000 at one bank and still be fully insured. Here's how:

  • Joint accounts (those owned by two or more people who have equal withdrawal rights) are insured up to $100,000 per co-owner. For example, one or more joint accounts owned by a husband and wife at the same bank would be insured up to a combined limit of $200,000 – $100,000 for each spouse.

  • If you have deposit accounts in different "ownership categories," these funds are separately insured. That means your deposits in single accounts (in your name only), joint accounts, and revocable trust accounts (which will pass to one or more named beneficiaries when the account owner dies) are each separately insured.

    For example, if you have one or more single accounts in your name alone (insured up to $100,000), your spouse has one or more single accounts in his or her name alone (insured to $100,000), and you and your spouse together have one or more joint accounts at the same bank (insured to $200,000), the total FDIC coverage at that bank for you and your spouse is $400,000.

  • Revocable trust accounts are insured up to $100,000 per owner for each "qualifying" beneficiary named in the account, separately from any money you may have in single and joint accounts. A qualifying beneficiary is a spouse, child, grandchild, parent or sibling. (Others who might be named in the account, including in-laws, cousins, nieces, nephews, friends, charities and trusts, are not considered qualifying beneficiaries for deposit insurance purposes.) So, if you have a revocable trust naming two qualifying beneficiaries – let's say your spouse and a child – it would be insured up to $200,000.

  • Federal law also provides up to $250,000 in deposit insurance coverage for certain retirement accounts, such as Individual Retirement Accounts (IRAs). Check with the FDIC to learn more about what types of retirement deposits qualify for up to $250,000 in coverage. Here again, deposits in this insurance category are separately insured from your other accounts at the same bank.

"People are usually amazed when they call us for information about their insurance coverage and learn just how much deposit insurance coverage they can get at one insured bank or savings association," said Kathleen Nagle, Chief of FDIC's Deposit Insurance Section. "There are lots of ways to qualify for additional insurance coverage, but it's important to understand there are requirements that apply to receive that extra coverage. That's why we always encourage folks to check out our Web site or talk to one of our deposit insurance experts." (See the box below.)

2. Periodically review your insurance coverage. It makes sense to check up on your deposit insurance coverage if you or your family have more than $100,000 at one institution. You especially may want to take another look if there's been a change in your life that could reduce your insurance coverage.

For example, if two people own a joint account and one dies, the FDIC's rules allow a six-month grace period after the depositor's death to give survivors or estate executors a chance to restructure accounts. If you fail to act within six months, that joint account could become part of the survivor's individual accounts, and that could put funds over the $100,000 limit.

You also should review your insurance coverage before depositing a large sum of money, a common situation after an inheritance, a home sale, a payout from a pension or an insurance claim. Also do your homework if you own accounts at two institutions that merge and the combined funds exceed $100,000. The deposit insurance rules also allow for a grace period of six months, and sometimes longer, after a merger, so you should review your accounts within that time period to avoid a potential problem.

3. If necessary, you can make adjustments to your accounts to bring them within the insurance limit. In general, you have two options for fully insuring deposits that exceed the FDIC's insurance limit.

One is to divide the funds among various ownership categories at the same institution, because different categories are separately insured to $100,000 or more, but this is an option you need to think about carefully. For example, if you move some money from a single account into a joint account with someone else or into a revocable trust account, realize that you are giving that other person legal ownership of the money, either now or upon your death.

Your second option is to move funds over the insurance limit to accounts at other insured institutions. This option works well for people who don't want, or don't qualify for, other ownership categories at their existing bank.

4. Take responsibility for knowing your deposit insurance coverage. Some people who've lost money in a bank failure said they mistakenly thought they were fully insured. "Regardless of the reason why a depositor has uninsured funds, the FDIC is bound by law to pay deposits according to the federal insurance limits," said James Williams, an FDIC Consumer Affairs Specialist. "As much as the FDIC would like every customer to be fully protected when a bank fails, federal law is very specific about how much insurance the FDIC can pay. That's why it's important for consumers to take the time to be sure they're fully insured."

5. Call the FDIC toll-free or take advantage of other resources to get answers to your questions about insurance coverage. In most cases, there are requirements that depositors must meet to receive expanded insurance coverage. So don't hesitate to contact the FDIC to get advice from a deposit insurance expert.

The FDIC staffs a toll-free consumer assistance line at 1-877-ASK-FDIC (that's 1-877-275-3342), features deposit insurance brochures and other resources on our Web site (www.fdic.gov/deposit/index.html), and responds to letters and e-mails. (See the box below.)

For more information: In addition to the resources noted above, remember that our quarterly FDIC Consumer News publishes information and updates on deposit insurance matters, usually in each issue. For example, the Spring 2006 edition included a guide to understanding FDIC insurance coverage, including a look at the "top 10" misconceptions people have about FDIC insurance. Current and past issues are online at www.fdic.gov/consumernews. You can also sign up to receive an e-mail bringing you each new edition of FDIC Consumer News posted to our Web site.

For More Help or Information Regarding Your FDIC Insurance

Call our toll-free consumer assistance line at 1-877-ASK-FDIC (that’s 1-877-275-3342). It is staffed Monday through Friday from 8:00 a.m.to 8:00 p.m., Eastern Time. For the hearing-impaired, call 1-800-925-4618.

Visit the FDIC Web site at www.fdic.gov/deposit/index.html to access brochures, videos, an online insurance calculator in English and Spanish, and a Customer Assistance Form you can use to e-mail the FDIC. You can also find articles on deposit insurance in back issues of FDIC Consumer News.

You can also mail us a letter by writing to the FDIC, Deposit Insurance Section, Division of Supervision and Consumer Protection, 550 17th Street, NW, Washington, DC 20429-9990.