Are All Certificates of Deposit FDIC Insured?

Certificates of Deposit, often called CDs, offer a structured way to save money by holding a fixed amount for a set period, ranging from a few months to several years. In exchange for this commitment, the issuing institution pays a fixed interest rate, which can be higher than traditional savings accounts. CDs are a low-risk savings option, making them attractive to individuals seeking predictable returns on their funds.

Understanding FDIC Coverage

The Federal Deposit Insurance Corporation (FDIC) is an independent agency established in 1933 to maintain stability and public confidence in the nation’s financial system. Its primary role is to insure deposits in commercial and savings banks within the United States, protecting depositors in the event of a bank failure. Since its inception, no depositor has lost a single penny of insured funds due to a bank failure.

FDIC insurance covers deposits dollar-for-dollar, including principal and any accrued interest, up to a standard limit of $250,000 per depositor, per insured bank, for each ownership category. This means how an account is legally owned determines the insurance coverage. Common ownership categories include single accounts held by one person, joint accounts owned by two or more individuals, and certain retirement accounts such as IRAs or self-directed 401(k)s. For instance, a joint account with two owners can be insured for up to $500,000, as each co-owner’s share is separately insured up to $250,000. This deposit insurance is backed by the full faith and credit of the United States government.

CDs That Are Insured

Most Certificates of Deposit are covered by FDIC insurance, provided they are issued by an FDIC-insured bank. This coverage applies to traditional fixed-rate, fixed-term CDs, protecting principal and earned interest up to the standard limits. This includes CD products offered directly by banks.

Jumbo CDs, while requiring a larger minimum deposit, are also FDIC-insured up to the standard limits. Their insurability stems from their nature as deposit products at an insured institution, similar to standard CDs. Brokered CDs, purchased through brokerage firms, are also FDIC-insured. This protection applies because the underlying CD is an obligation of the issuing bank, not the brokerage firm itself. Investors can expand their FDIC coverage by purchasing brokered CDs from multiple different FDIC-insured banks through a single brokerage account, as each bank’s CDs are separately insured.

Investments Not Covered

FDIC insurance specifically covers deposit products and does not extend to investment products, even if offered or purchased through an FDIC-insured bank. This distinction is important for consumers evaluating the safety of their financial holdings. For example, mutual funds, including money market mutual funds, are not FDIC-insured because they are investment vehicles subject to market fluctuations, unlike money market deposit accounts, which are insured.

Annuities are not covered by FDIC insurance; they are insurance products backed by the financial strength of the issuing insurance company. While state guarantee associations may offer some protection in the event of an insurer’s failure, this differs from federal deposit insurance. Stocks, bonds, and other securities are not FDIC-insured, as their value can fluctuate with market conditions. This includes U.S. Treasury bills, notes, and bonds, which, while backed by the full faith and credit of the U.S. government, do not carry FDIC protection. Other financial products such as life insurance policies, municipal securities, crypto assets, and the contents of safe deposit boxes are not covered by FDIC insurance.