FDIC insurance is the most attractive part of having a deposit account over investing money in something involving more risk. With funds that are FDIC insured, you’re guaranteed to get your money back if your institution fails by the FDIC as long as you fall within the guidelines. There are a few misunderstanding when it comes to FDIC insurance, but it’s important to know exactly what FDIC does and does not cover as someone who places their money into a bank deposit account.
1.) The FDIC insures funds for up to $100,000
During the financial meltdown a couple years back, congress voted to increase the FDIC insured limit up to $250,000 to ensure that people didn’t lose their money when a new bank was failing every other day. The measure they passed was temporary at first, which is why some people might think it expired. But congress acted before its expiration to make the $250,000 FDIC insured limit permanent. So that is the new limit as of this day.
2.) All financial institutions have FDIC Insurance
Most financial institutions you’ll hear of likely have FDIC insurance, but not all do. Every bank we recommend on our site has it (or NCUA for credit unions), but there are institutions out there that aren’t FDIC insured. You should make sure to check any new financial institution you’re interested to make sure they’re FDIC insured by checking with the FDIC themselves.
3.) I can only get $250,000 insured at one bank
The FDIC allows people to insure multiple types of account at a single bank. For example you can have a personal account, joint account, and retirement account, all at one bank and all insured for up to $250,000 each. In addition banks have programs known as Certificate of Deposit Account Registry Service or CDARS, A CDARS account actually holds your funds at multiple banks in order to bump up the FDIC insured limit for “one account.” It’s a very convenient way to get FDIC insurance for large sums of money.
4.) I can get up to $250,000 insured with each bank account I have at one bank
Although you can get multiple accounts at a single bank FDIC insured, that doesn’t mean that you can have $250,000 of FDIC insurance with ANY bank account you want at a single bank. For example a savings and checking account under one person’s name doesn’t qualify as different accounts in the eyes of the FDIC. However, a personal checking account and a joint checking account DOES qualify as separate accounts to the FDIC because the owner of both accounts isn’t the same. One is owned by an individual and another is owned by 2 individuals.
5.) Any asset that a bank offers is covered by FDIC insurance
While banks offer many accounts that are covered by FDIC insurance, they also offer products that don’t come with FDIC insurance. For examples banks will offer mutual funds, stocks, bonds, money market mutual funds, and other products that don’t come with FDIC insurance. If you’re getting a new product from a bank and you’re unsure whether it comes with FDIC insurance then ask your bank whether the account you’re interested in has FDIC insurance.
A big, big myth is the scenarios that the FDIC covers. The FDIC only covers your CD if the bank fails. The FDIC does not cover losses from theft. If a bank employee or robber steals your money, the FDIC does not cover that. Now, the bank should certainly have outside insurance that covers those situations, but recovering those funds could take some time.
So make sure you keep copies of deposits, especially when they are in cash.