Are Certificate of Deposit Accounts FDIC Insured?

A Certificate of Deposit (CD) is a type of savings account that holds a fixed amount of money for a specific period, such as six months or five years, and in return, the issuing bank pays interest. When the term ends, the depositor receives the original investment plus accrued interest. CD accounts are insured by the Federal Deposit Insurance Corporation (FDIC), an independent U.S. government agency that protects depositors’ money in insured banks and maintains financial system stability.

Understanding FDIC Coverage Limits

The standard FDIC insurance coverage limit is $250,000 per depositor, per insured bank, for each ownership category. All deposit accounts held by one person in the same ownership capacity at the same insured bank are combined and insured up to this limit. For example, if an individual has a CD, a checking account, and a savings account all in their sole name at the same bank, the combined total of these accounts is insured up to $250,000. This coverage includes both the principal amount and any accrued interest up to the date an insured bank closes.

Deposits in different banks are insured separately. An individual can have $250,000 insured at one bank and another $250,000 insured at a different bank, effectively expanding their total coverage. All branches of the same bank, including online divisions, are considered part of that single insured bank for coverage purposes. Deposits spread across multiple branches of the same bank are aggregated under the $250,000 limit for that institution.

How Ownership Affects Coverage

The $250,000 FDIC coverage limit can apply multiple times for the same individual at a single bank if funds are held in different ownership categories. Each distinct ownership category at the same insured bank receives its own $250,000 in coverage. This structure allows depositors to significantly increase their total insured amount beyond the basic individual limit.

For single accounts, owned by one person without named beneficiaries, all such accounts at the same bank are combined and insured up to $250,000. Joint accounts, owned by two or more people, are insured separately, with each co-owner’s share insured up to $250,000. This means a joint account with two co-owners can be insured for up to $500,000.

Certain retirement accounts, including Traditional and Roth IRAs, SEP IRAs, and SIMPLE IRAs, form another distinct ownership category. All self-directed retirement accounts for the same person at the same bank are aggregated and insured up to $250,000. Naming beneficiaries on these retirement accounts does not increase coverage.

Revocable trust accounts, often used for estate planning, are insured based on the number of unique beneficiaries named in the trust. These accounts are insured up to $250,000 per eligible beneficiary. Irrevocable trust accounts also fall under these updated rules, receiving similar coverage based on eligible beneficiaries.

Special Considerations for CD Insurance

Certificates of Deposit can be purchased directly from banks or through brokerage firms, known as brokered CDs. Even when purchased through a broker, the CD’s insurance applies per depositor, per the issuing bank, not the brokerage firm. The FDIC insurance follows the underlying bank that issued the CD.

Callable CDs, which allow the issuing bank to redeem the CD before its maturity date, are also fully FDIC insured under standard rules. While these CDs may offer higher interest rates due to the call risk, their deposit principal and accrued interest remain protected up to the standard limits.

To verify if a bank is FDIC-insured, look for the FDIC sign at the bank’s physical location or on its official website. The FDIC also provides online tools, such as BankFind, to confirm a bank’s insured status. If an FDIC-insured bank fails, the FDIC acts quickly to ensure depositors regain access to their insured funds. Typically, the FDIC provides access to funds within a couple of business days, either by establishing a new account at another insured bank or by issuing a check to the depositor.

The FDIC only insures deposit accounts, not investment products. This includes investments like stocks, bonds, mutual funds, annuities, and cryptocurrencies, even if they are purchased through an FDIC-insured bank. Additionally, the contents of safe deposit boxes are not FDIC-insured.