Know Your Limits: Why, When and How to Be Sure You're Fully Protected by FDIC Insurance

Federal Deposit Insurance Corp. ^ | Winter 2008 | FDIC

[RKBA Democrat]

A deposit in an FDIC-insured bank or savings institution is one of the safest ways to protect your money. Bank failures are uncommon (only three banks failed in 2007). Also, the overwhelming majority of depositors have accounts that are fully within the FDIC's insurance limits. However, "if a bank fails, any deposits that exceed the FDIC's insurance limits are not protected by FDIC insurance," said Kathleen Nagle, Associate Director of the FDIC's Consumer Protection Branch. "That's why it's important for consumers to be aware of their insurance coverage and how they might ensure that their deposits are fully protected."

Here are some basic points to remember.

If you (or your family) have $100,000 or less in all of your deposit accounts at the same insured bank, you don't need to worry about your insurance coverage. Your deposits are fully protected under federal law and FDIC rules because the basic insurance coverage is $100,000 per depositor per insured institution.

You may qualify for more than $100,000 in coverage at one insured bank if you own deposit accounts in different "ownership categories." For example, let's say you have three accounts at one bank. Two of the accounts you own by yourself – a savings account totaling $65,000 and a checking account with a balance of $9,000. The third account is a $180,000 certificate of deposit (CD) that you own jointly with another person, and your share is presumed to be half ($90,000) unless specified otherwise. Because the checking and savings accounts are both held in the single-account category (that is, owned by one person), they are added together for insurance purposes and the total ($74,000) is fully insured since it is under the $100,000 FDIC limit for single accounts. Because the CD is a joint account (a different ownership category), your $90,000 share is fully insured, separately from your single accounts. So, even though you have $164,000 in deposits at one bank, all of it would be fully insured by the FDIC.

In addition, FDIC rules for some ownership categories allow you to hold more than $100,000 in one account and still be fully insured. For example, certain retirement accounts are insured up to $250,000 per owner per bank. And, the owner of one or more revocable trust accounts – a category of deposits intended to pass along to named beneficiaries upon the owner's death – can be insured up to $100,000 for the actual interests of each qualifying beneficiary if certain requirements are met. That would mean all the revocable trust accounts you have in one insured bank could be insured for as much as $200,000 if there were two qualifying beneficiaries, $300,000 if there were three, and so on. The rules for coverage of revocable trust deposits, which include payable-on-death accounts and living trust accounts, are very specific. For more information, check with the FDIC.

Periodically review your coverage if there's been a big change in your life or banking situation and you have deposits of more than $100,000 at one bank. For example, if two people have a $150,000 joint account (which is fully insured up to $200,000), and one of them dies, the survivor has six months under the FDIC's rules to restructure the account. After that, the entire account is insured as the survivor's single-ownership deposits along with any other accounts in that group, up to $100,000, thus leaving $50,000 or more over the insurance limit and at risk of loss if the bank failed.

Also review your coverage if you own accounts at two institutions that merge and the combined funds exceed $100,000. Accounts at the two institutions before the merger continue to be separately insured for six months after the merger, and longer for CDs, but you have to remember to review the accounts within the grace period to avoid a potential problem with uninsured funds.

The FDIC can help you understand and determine your insurance coverage. To learn more about how to qualify for more than $100,000 in coverage at one bank, you need to know how FDIC insurance works.

For guidance 24 hours a day, seven days a week, go to http://www.fdic.gov/deposit/deposits/index.html to find insurance brochures and videos. This site also gives you access to our interactive Electronic Deposit Insurance Estimator (EDIE), which allows users to calculate the insurance coverage of their accounts and generate a printable report that clearly states if their deposits are fully insured or not. The FDIC also responds to letters, e-mails and calls from consumers who have questions about their insurance coverage.

[RKBA Democrat]

It's obvious that some bank failures are coming. If you have a significant amount in any FDIC insured bank, say for a small business account, you should make sure that FDIC insurance will cover any deposits you have. If you have multiple accounts at one bank, you might not be covered if the amount exceeds $100K.

[RKBA Democrat]

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[arthurus]

When the banks go the dollar will be gone already and 100,000 won’t mean much at all.

[rabscuttle385]

Make sure to read up on NCUA share insurance for your credit union accounts.

[montag813]

"You're thinking of this CDO all wrong. As if they had the money back in a safe. The money's not here. Your money's in a super senior synthetic tranche hedged with a CDS on Joe's house...right next to yours. Supported by the excess spread from the Kennedy house, and Mrs. Macklin's house, and a hundred others. Why, you're lending the Orange County firemen's retirement fund the money to short builders commercial paper, and then, they're all going to pay it back to you as best they can."

"I'm worth more dead than as Morgan stanley CEO!"

"Everytime Ben Bernake sings, a broker gets his wings!"...

[goldstategop]

If you have more than that, set up accounts with different banks. You should be safe as long as your assets in each bank don't exceed 100G.

"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus

[RKBA Democrat]

LOL!

[PLMerite]

“When the banks go the dollar will be gone already and 100,000 won’t mean much at all.”

That’s why you should have an emergency stash of gold, silver and copper-jacketed lead.

[freespirited]

I have been buying a fair number of CDs lately through my broker online. Before I make the trades, I use the service at bankrate.com to check out the health of the banks. Even though everything is FDIC, I figure why deal with a bank that is likely to fail and cause any sort of hassle with the govt. Especially since for every bank with an unsatisfactory rating, a bank with good rating is usually offering the same thing.

http://www.bankrate.com/brm/safesound/ss_home.asp

[AmericanInTokyo]

Consider overseas banking as well, shifting a reasonable portion of your US dollar life savings or other savings resources into more trustworthy long-term grown Asian-nation currencies and banks, as this high growth rate, manufacturing steamroller region will be really is happening at least for the next 10 years, as the US declines and hollows out into a McDonalds Service Economy and is overrun by illegal aliens inspiring massive welfare budgets bankrupting us all.

[freespirited]

I try to keep things reasonably simple; I have all my assets at two brokerages.

Can I access these currencies through my brokerages? Is there an ETF (I like them) for Asian currencies?

[GnuHere]

LOLOL.

Oh, but I’m sure my bank won’t fail. Why? Because it’s B of A, and they are so busy catering to Espanol clients - “Zuzu, every time a chihuahua barks, an illegal alien gets an account!”

[AmericanInTokyo]

I too do not recommend too much complexity and just the right amount of panic which allows you to see and think straight.

Therefore, just a partial shift might be in order. My comments are along the lines of FDIC, and anything in the course of a massive US meltdown could be overruled by new laws out of Washington, such as freezing accounts or limited withdrawls. Washington could take such action in a major emergency, FDIC insurance regardless. Which one of us here trusts Washington, or anything written in a contract these days.

Having said that, yes, you can open for example NRI accounts in India, or accounts in Europe, Singapore, etc. Best to just go on line to these banks, or see if they have branches in the US (many do in New York) and send your inquiries there. I do know for example CDs in Iceland pegged to the Kroner there are eye opening, something like 6 month CDs with very favorable rates, etc. Going to the USA on my next business trip backed up by the Japanese Yen I will take will make the place a bargain basement for me (at least in the near future with over 100 Yen to US dollar region now fully being entered ala 1995 endaka days). New Zealand dollar is doing good, South Africa and its Rand is a good place to start as well. Of course, these rise and fall as well, so caveat emptor. I for one just do not think wise Americans should have all of their life savings and investments solely in the US dollar, despite the fact we are all patriotic and love our country and dollar, we have to wake up to global realities and be wise as well. God Bless America but at the end of the day, every man for himself, you know.

[AmericanInTokyo]

Sorry, wanted to add to answer you: YES, You could for example get a yen based kind of ETF deal with a Japanese securities firm investing in high growth Asian infrastructure such as India, Malaysia, Singapore, etc. Or you could go the Asian ETF (India ETF, China ETF, Whatever ETF) route right there in the USA on US exchanges. HSBC in Japan has lots of interesting Asian infrastructure stuff, but you need a long term stomach and discipline for a lot of this stuff IMHO.

So yes, there are similar ETF right here in Asia and they may not be dollar based for you to start with. Taiwan might be a good place to look at if there is a Taiwan ETF, what with the Taiwan election coming up on 22 March and probably pro-business candidate Ying Jeo Ma of the Kuomintang Party being elected. Lots of people are getting positive on Taiwan these days out here.

[PghBaldy]

I have spent the last year trying to get my mom and her trustees (my brothers) to pay attention to this. SHe is SERIOUSLY over the limit in a poorly rated bank... Spent the day talking to them, but again, nothing done. I wish I didn’t follow these things so closely, since no one listens. I would not be shocked if her bank worsens. It is a major regional bank, which got hurt badly by housing collapse.