FACT SHEET: FDIC Insurance and Bank Failure

The FDIC insures deposits in most of the nation’s banks and savings associations in the case of failure. FDIC deposit insurance covers the balance of each depositor’s account, dollar-for-dollar, up to the insurance limit. Unless you have more than the insured amount deposited in a single bank, there is no need to worry; your money is completely protected.

NOTE: The FDIC does NOT insure money invested in stocks, bonds, mutual funds, life insurance policies, annuities, or municipal securities.

Legislation was recently passed to temporarily raise the basic limit on federal deposit insurance coverage to $250,000 per depositor. (The legislation did not increase coverage for retirement accounts; it continues to be $250,000.) The legislation authorizing the increase in deposit insurance coverage limits makes the change effective October 3, 2008, through December 31, 2009.

Types of FDIC Insured Accounts

  • Single Accounts are deposits owned by one person. All single accounts owned by the same person at the same insured bank are added together and the total is insured up to $250,000. Deposits in separate branches of the same insured bank are not separately insured.
    Examples of single accounts:

    o Accounts held in one person’s name alone
    o Accounts held in the name of a business that is a sole proprietorship
    o Accounts established for a decedent’s estate

  • Joint Accounts are deposits owned by two or more people. Each co-owner’s share of every account that is jointly held at the same insured bank is added together with the co-owner’s other shares and the total is insured up to $250,000. Each owner’s shares are considered equal so a couple with a joint account can get up to $500,000 coverage.
  • Certain Retirement Accounts are deposits owned by one person and titled in the name of that person’s retirement account. All retirement accounts owned by the same person in the same insured bank are added together and the total is insured up to $250,000.
    Examples of certain retirement accounts:

    o All types of IRAs
    o All Section 457 deferred compensation plan accounts
    o Self-directed 401(k) and Keogh plans

  • Revocable Trust Accounts are deposits owned by one or more people that indicate an intention that the deposits will belong to named beneficiaries upon the death of the owner. This account can be terminated at the discretion of the owner.
    Examples of revocable trust accounts:

    o Payable-on-Death (POD) Accounts are insured up to $250,000 for each beneficiary
    o Living/Family Trust Accounts are insured up to $250,000 per owner for each named beneficiary

In the event of liquidation or closing of any FDIC insured bank, payment of the insured deposits are made as soon as possible. In the past, payments have been made available to the consumer within a few days.

Updated: October 21, 2008