What Is FDIC Insurance?

What Is Covered by FDIC Insurance?

FDIC insurance covers an array of accounts and products at insured banks. These include:

• 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, which are a type of checking account

Products that are not covered by FDIC insurance include:

• Stocks
• Bonds
• Mutual funds
• Life insurance policies
• Annuities
• Municipal securities
• Safe deposit boxes and their contents
• U.S. Treasury bills, bonds or notes
• Cryptocurrency assets

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: These are deposit accounts owned by one person without named beneficiaries. They include checking accounts, savings accounts, CDs and money market accounts, and are insured up to a total of $250,000.
• Joint accounts: These are deposit accounts owned by two or more living people without named beneficiaries. They are insured up to $250,000 per co-owner. So if you and your spouse are co-owners on deposit accounts at an FDIC-insured bank, you're insured for up to a combined $500,000.
• Certain investment accounts: Among the accounts in this category are self-directed individual retirement accounts (IRAs), self-directed defined contribution plans like 401(k) and profit-sharing plans, self-directed Keogh plans and Section 457 deferred compensation plans (whether self-directed or not). All eligible retirement accounts owned by the same person at the same bank are added together and insured up to $250,000.
• Revocable trust accounts: These accounts are owned by at least one person who identifies at least one beneficiary who will receive the deposits when the owner or owners die. All revocable trust accounts owned by the same person at the same bank are added together, and the owner is insured up to $250,000 per beneficiary.
• Irrevocable trust accounts: These are accounts opened in connection with an irrevocable trust. The owner adds deposits or other property to the trust and gives up all power to cancel or change the trust. Irrevocable trusts are typically insured for a maximum of $250,000, regardless of the number of beneficiaries.
• Corporate, partnership or unincorporated association accounts: These accounts hold deposits owned by corporations, partnerships and unincorporated associations, including for-profit and not-for-profit organizations. All deposits owned by a corporation, partnership or unincorporated association at the same bank are lumped together and insured up to $250,000.

What Happens to Deposits Over $250,000?

Bank deposits over the coverage limits noted above, including $250,000 per account holder on deposit accounts, might not be FDIC-insured.

So, if you are a single account owner and your bank goes out of business, you could recoup as much as a combined $250,000 from your checking and savings accounts at that bank. If your combined deposits at the bank were, say, $300,000, you might not be covered for $50,000 of that total.

Meanwhile, a joint account is insured up to $250,000 per depositor. So, if you and your spouse kept funds in a few savings accounts at a bank, your jointly owned accounts would be covered for a total of $500,000 ($250,000 for each spouse). The FDIC wouldn't promise coverage over $500,000 in this situation.

Now, let's say you and your spouse have $600,000 in joint savings accounts at one bank. To guarantee FDIC coverage for all of that money, you might consider evenly splitting the $600,000 between accounts at two different banks. That way, all your money would be insured. Why? Because neither account would exceed the $500,000 limit for joint accounts at a single bank.

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.

Keep in mind that most, but not all, banks are insured by the FDIC. To find out whether your bank is insured, use the FDIC's BankFind tool.

It's also worth noting that FDIC insurance doesn't apply to credit unions. Instead, the National Credit Union Administration (NCUA), an independent federal agency, provides up to $250,000 per account holder, per ownership category, at an NCUA-insured credit union. NCUA's coverage limits are similar to those for FDIC-insured banks.

The Bottom Line

FDIC insurance protects the deposits of millions of bank customers in the U.S. The FDIC insures many accounts at banks, such as checking and savings accounts, but doesn't insure all of them. Bank products that aren't insured by the FDIC include stocks, bonds and mutual funds. 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.