Are Bank CDs Covered by FDIC? Limits You Should Know

Depositing funds in a bank often comes with questions about security and protection. Understanding how your money is safeguarded is an important aspect of financial planning.

Understanding Deposit Insurance

The Federal Deposit Insurance Corporation (FDIC) is an independent federal agency that insures deposits at FDIC-insured banks in the event of a bank failure, maintaining stability and public confidence in the U.S. financial system. This insurance is automatic for eligible accounts at member institutions, meaning you do not need to apply or pay for it.

FDIC insurance covers various types of deposit accounts, including checking accounts, savings accounts, money market deposit accounts, certificates of deposit (CDs), cashier’s checks, and money orders issued by a bank. However, investment products such as stocks, bonds, mutual funds, annuities, and life insurance policies are not FDIC-insured, even if purchased through an insured bank. The contents of safe deposit boxes are also not covered.

CDs and Coverage Limits

Certificates of Deposit (CDs) are covered by FDIC insurance. This protection means that if an FDIC-insured bank fails, your CD deposits, including both principal and accrued interest, are protected up to the insurance limit. The standard insurance amount is $250,000 per depositor, per insured bank, for each ownership category. This limit applies to the total of all deposits held by one person in the same ownership category at a single bank.

The $250,000 limit varies based on account ownership. For single accounts, deposits are insured up to $250,000. Joint accounts are insured up to $250,000 per co-owner, providing $500,000 in coverage for two co-owners. Certain retirement accounts, such as IRAs (Traditional and Roth), SEP IRAs, and SIMPLE IRAs, are separately insured up to $250,000 per depositor at each bank.

Maximizing Your Insured Deposits

Depositors can strategically structure their holdings to maximize FDIC coverage, especially when total deposits exceed the standard $250,000 limit. One strategy involves utilizing different ownership categories at the same insured bank. Since each ownership category is insured separately, an individual can have a single account, a joint account, and a retirement account at the same bank, each receiving up to $250,000 in coverage. For example, a married couple could have $250,000 in a single account for one spouse, $250,000 in a single account for the other spouse, and $500,000 in a joint account, totaling $1 million in insured funds at one institution.

Another method is to spread funds across multiple separately insured banks. The $250,000 limit applies per depositor, per ownership category, per distinct bank. Each FDIC-insured bank provides its own separate $250,000 coverage limit. For instance, an individual with $500,000 could deposit $250,000 at one bank and another $250,000 at a different FDIC-insured bank, ensuring full coverage for the entire amount. Different branches of the same bank are considered one bank for insurance purposes.