The Federal Deposit Insurance Corporation (FDIC) insures properly established accounts at a bank or savings and loan. In recent years the insurance limit was $100,000. In October 2008, the insurance limit was raised to $250,000. (These higher limits are scheduled to remain in effect until December 31, 2013.)
In addition, “self-directed” retirement accounts, such as traditional and Roth IRAs, are insured up to $250,000 (not changed). This coverage amount was not increased at the time of increase for regular accounts.
The FDIC was established after the bank failures of the Great Depression and has provided security for depositors ever since. Banks pay into the FDIC and the FDIC can also ask the US Treasury for additional funds if needed. FDIC insurance at banks and S&Ls is similar to the deposit insurance protection at credit unions offered by the NCUA.
Generally, each person's accounts are insured up to a total of $250,000 and self-directed retirement accounts (IRAs) are insured up to $250,000. However, with multiple accounts, total coverage may be higher if the person has different ownership interests or rights in different types of accounts and all account forms are completed properly. Here are a few examples:
- Mary Doe's checking account balance is $80,000 and she has a $200,000 regular certificate of deposit. Her insurance is limited to $250,000.
- Mary Doe's checking account balance is $80,000 and her savings account balance is $100,000. In addition, she has a $125,000 IRA certificate of deposit. All of the balances are insured because the IRA account is insured separately.
- Mary and John Doe's joint checking account balance is $90,000 and they have a $200,000 certificate of deposit held jointly. All of their balances are insured.
The rules can get complicated with different types of accounts, especially with children and trust accounts. Careful structuring can enable you to have all your balances protected. Talk with a bank representative to make sure you get the maximum protection if your accounts exceed $250,000.
