FDIC insurance limit: How much of your money is protected?

Couple with laptop discussing financial paperwork in living roomImage: Couple with laptop discussing financial paperwork in living room

In a Nutshell

If you’ve ever put money in a bank, you may have heard that your funds are federally insured for up to $250,000. But in certain situations, FDIC insurance could actually apply to much more than that.
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Some bank deposits are federally insured — and the limit on that protection might be higher than you’re expecting.

An individual can have more than the standard $250,000 protection that’s provided by the Federal Deposit Insurance Corporation. Here’s what to know about FDIC insurance coverage and how much of your money it might protect.

What is FDIC insurance?

The severe economic downturn caused by the stock market crash of 1929 prompted some people to withdraw their money from their bank accounts, which resulted in roughly 9,000 banks failing within just a few years. The Federal Deposit Insurance Corporation, an independent agency of the U.S. government, was established in 1933 to restore public faith in the American banking system by insuring commercial bank deposits.

Thanks to the FDIC, if an FDIC-insured bank fails (which doesn’t happen often), customers don’t need to worry about losing their insured deposits. In fact, since the FDIC began operating, not a single person with an FDIC-insured deposit account has lost the money in their account because of a bank failure.

How much does FDIC insurance cost, and how do I get it?

Unlike your health insurance plan or auto insurance policy, you don’t need to pay a penny to be covered by FDIC insurance. Instead, banks pay premiums to the federal agency to remain insured.

The U.S. government backs the FDIC, so as long as your deposits are held with an FDIC-insured bank and are eligible for coverage, your deposits will be insured up to the coverage limit.

Does the FDIC cover deposits with credit unions?

The FDIC only insures deposits held with banks. But credit unions have their own insurance coverage provided by the National Credit Union Administration, also with a $250,000 limit.

What is the FDIC insurance limit?

When the FDIC was first established, the insurance limit was just $2,500 per individual making a bank deposit. Over the decades that followed, that limit increased seven different times due to inflation, economic crises and other factors.

In response to the Great Recession in 2008, the Emergency Economic Stabilization Act temporarily increased the FDIC insurance limit to $250,000. Then in 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act made that limit permanent.    

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You can have more than $250,000 insured

The $250,000 limit isn’t necessarily the maximum amount of money an individual can have covered by FDIC insurance.

The limit applies for each depositor, per FDIC-insured bank, per ownership category. This means that if you and your spouse have $500,000 in a joint savings account, each of you would be covered individually up to $250,000, making the entire balance insured.

And if you had $500,000 in the joint account and another $250,000 in a savings account with the same bank where you’re the sole owner, you’d get the full $250,000 insured on both accounts because they fall under different ownership categories.

You’d also be able to have accounts with multiple banks and get the full protection amount on each one.

What does FDIC insurance cover?

If your bank is insured, the following accounts are covered under the FDIC insurance limit:

  • Checking accounts
  • Savings accounts
  • Money market deposit accounts
  • Certificates of deposit, or CDs
  • Cashier’s checks, money orders and other official items issued by the bank
  • Prepaid debit cards (as long as they meet FDIC requirements)
  • Negotiable order of withdrawal accounts

Remember, though, that the FDIC insurance coverage limit is per depositor, per insured bank, for each account ownership category. Here are the ownership categories the FDIC covers.

  • Single accounts owned by one person
  • Joint accounts owned by two or more people
  • Certain retirement accounts
  • Revocable trust accounts
  • Irrevocable trust accounts
  • Corporation, partnership and unincorporated association accounts
  • Employee benefit plan accounts
  • Government accounts

With accounts that have more than one owner, each person is insured up to the $250,000 maximum. Things get a little more complicated with specialized accounts, though. With trust accounts, for example, the limit applies per owner per unique beneficiary. Check the FDIC website to get more details for your specific account type. If you want to know exactly how much of your deposits are covered based on your situation,  you can get an idea by using the FDIC’s Electronic Deposit Insurance Estimator.

Are all banks FDIC insured?

It’s rare for a bank to not be FDIC insured, but it’s possible. The Bank of North Dakota, for example, is insured by the state government instead of the federal agency. If you’re not sure about your bank, you can search the BankFind database on the FDIC website.

What isn’t covered by FDIC insurance?

Not all accounts are covered by the FDIC, even if they’re held with an insured bank. More specifically, here’s what isn’t protected.

  • Stock investments
  • Bond investments
  • Mutual funds
  • Life insurance policies
  • Annuities
  • Municipal securities
  • Government securities
  • Safe deposit boxes and their contents
  • U.S. Treasury bills, bonds and notes

How does the FDIC pay me back if my bank fails?

Keep in mind that FDIC insurance only covers you if your bank fails. It doesn’t apply if your bank is acquired by a different financial institution.

If your bank goes under and there’s no other financial institution willing to acquire its deposits, the FDIC may cut you a check for your insured amount. This typically occurs within a few days of the bank closing down for good. Or the FDIC may provide you with a new account at a different insured bank and fund the account for the covered amount you had in the failed bank.

If you have more questions about the process or anything else related to the FDIC, visit the agency’s FAQ page.

What’s next?

If you’re worried about exceeding the FDIC insurance coverage limits, your money may do more good for you in an investment account. Deposit accounts like checking, savings and money market accounts are best suited for immediate needs, such as an emergency fund or for down payment savings.

Many checking accounts don’t earn interest — and even among those that do, the national average is 0.04%, according to the FDIC. The average interest rate for savings accounts isn’t much higher at 0.05%, though high-yield savings accounts tend to offer more.

Investing your money with a brokerage account, in real estate or another way could help make your excess funds work harder for you. If you’re not sure where to put your money, consult a financial advisor who can provide you with personalized advice based on your situation.

About the author: Ben Luthi is a personal finance freelance writer and credit cards expert. He holds a bachelor’s degree in business management and finance from Brigham Young University. In addition to Credit Karma, you can find his wo… Read more.