Tuesday, July 22, 2008

Are my Bank Deposits Insured by the FDIC?

Although I have been careful keep our bank accounts under the FDIC maximum insurance limits, I decided to do a quick check, given about 5% of deposits were not covered by FDIC insurance in the recent IndyMac takeover.

Here's a summary of my research:

  1. FDIC insurance only covers checking accounts, savings accounts and CDs. It does not cover other financial products such as mutual funds and money market funds.

  2. Insurance is per person by type of account in each bank. Individuals are insured up to $100,000 for all single accounts by the same person at one bank. Joint accounts are separate from individual accounts are insured for up $100,000 per co-account holder, i.e. all joint accounts for each co-owner are added up. Certain retirement accounts are insured up to $250,000 per person. Revocable trusts are insured up to $100,000 per qualified beneficiary.

    At IndyMac, some depositors mistakenly thought multiple single accounts, in the same name, would give protection over $100,000. The correct answer is to have multiple single accounts at different banks, each below $100,000.

I already knew the mutual funds and money market funds were not insured by the FDIC. However, before doing this research, I didn't know that single accounts at the same bank were aggregated together for FDIC insurance purposes. I had always thought that a checking account, a savings account, and CDs in the same name were each insured for $100,000, for a total of $300,000. WRONG! Fortunately, because we have investing in CDs at different banks, we don't exceed $100,000 at any one bank for single accounts in the same name.

For more details, see Your Insured Deposits by the FDIC. For specific information on types of accounts, see the Ownership Categories by the FDIC.

For more on Ideas You Can Use, check back every Tuesday for a new segment.

This is not financial advice. Please consult a professional advisor.

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1 comment:

Anonymous said...

Excess FDIC Insurance is available though you will need a licensed insurance agent to help. Cost is approximately $1500/$1m of excess coverage which is normally paid by the bank. Requires the bank's CEOP to sign the application.