How Much Is Your Money Insured for in a Bank?

When depositing money into a bank, understanding how those funds are protected is important. Deposit insurance provides a safeguard, ensuring money remains accessible even if a financial institution encounters difficulties. This system helps maintain stability and public confidence in the financial system. This protection extends to various types of accounts and can be maximized by understanding how coverage limits are applied.

Understanding Bank Deposit Insurance

Bank deposit insurance is a system designed to protect depositors’ money in the event of a bank failure. In the United States, the primary agency responsible for this protection is the Federal Deposit Insurance Corporation (FDIC). The FDIC is an independent agency that insures deposits at banks, covering both principal and any accrued interest up to the insurance limit of $250,000. This coverage is automatic for all deposits made at an FDIC-insured bank.

This insurance covers various types of deposit accounts. These commonly include checking accounts, savings accounts, money market deposit accounts (MMDAs), and Certificates of Deposit (CDs). Cashier’s checks, money orders, and other official items issued by a bank are also protected. The purpose of this coverage is to ensure that depositors do not lose their funds if their bank fails, a measure established to prevent widespread panic and maintain stability in the banking system.

However, not all financial products offered by banks are covered by FDIC insurance. This protection specifically applies to deposit accounts. Investment products, even if purchased through an FDIC-insured bank, are generally not covered. Examples of uninsured products include stocks, bonds, mutual funds, annuities, and life insurance policies. Cryptocurrencies and the contents of safe deposit boxes are also not protected by FDIC insurance.

How Deposit Limits Apply to Different Account Ownership Categories

The standard deposit insurance amount of $250,000 applies per depositor, per insured bank, for each account ownership category. This structure allows individuals to potentially have more than $250,000 insured at a single bank by holding funds in different ownership categories.

Single Accounts

For single accounts, which are owned by one person without named beneficiaries, the balances of all such accounts at the same bank are combined and insured up to $250,000. For example, if an individual has a checking account, a savings account, and a CD, all solely in their name at the same bank, the total of these balances is insured up to $250,000. Funds held in different branches of the same bank are aggregated under the same single account limit.

Joint Accounts

Joint accounts, owned by two or more people, are insured separately from single accounts. Each co-owner’s share in all joint accounts at the same bank is insured up to $250,000. If two individuals jointly own an account, their combined coverage for that account can be up to $500,000, assuming equal ownership. This means a married couple can have $250,000 each in individual accounts and an additional $500,000 in a joint account at the same bank, totaling $1 million in coverage.

Retirement Accounts

Certain retirement accounts, such as Traditional IRAs, Roth IRAs, SEP IRAs, SIMPLE IRAs, self-directed 401(k)s, and 457 deferred compensation plans, are combined and insured separately up to $250,000 per owner. This coverage applies to deposit products held within these retirement accounts, like CDs or money market accounts.

Trust Accounts

For revocable trust accounts, including “Payable on Death” (POD) or “In Trust For” (ITF) accounts, the rules have been simplified as of April 1, 2024. These accounts are now insured up to $250,000 per unique beneficiary, with a maximum of five beneficiaries recognized for deposit insurance purposes. This means a single owner of a revocable trust account can potentially have up to $1,250,000 in coverage if they name five eligible beneficiaries. Eligible beneficiaries must be natural persons or charitable organizations.

Irrevocable trust accounts also follow the simplified rules as of April 1, 2024, falling under the same category as revocable trusts for insurance calculation. The interest of each beneficiary is separately insured up to $250,000, provided certain conditions are met, such as clearly identifying the beneficiaries and their interests. If the trust has five or fewer beneficiaries, the maximum coverage is $250,000 multiplied by the number of beneficiaries, up to $1,250,000 per owner. Employee benefit plan accounts are also recognized as a separate ownership category, with their own specific rules for coverage.

Insuring Your Funds Across Multiple Institutions

The deposit insurance limit applies on a “per insured bank” basis, meaning that individuals can increase their total insured funds by distributing their money across multiple distinct financial institutions. If you have accounts at different FDIC-insured banks, the $250,000 limit applies to your deposits at each separate institution. This allows a depositor to have significantly more than $250,000 covered simply by holding funds in different banks. For example, $250,000 at one bank and $250,000 at another bank would result in $500,000 in total insured deposits.

Similarly, credit unions in the United States are insured by a separate federal agency, the National Credit Union Administration (NCUA). The NCUA operates the National Credit Union Share Insurance Fund (NCUSIF), which provides the same level of protection as the FDIC. This means deposits at federally insured credit unions are protected up to $250,000 per depositor, per insured credit union, for each account ownership category.

The key distinction is that coverage at a credit union is separate from coverage at a bank. Funds held in an FDIC-insured bank are insured by the FDIC, while funds in an NCUA-insured credit union are insured by the NCUA. This allows depositors to further expand their total insured amounts by utilizing both banks and credit unions. For instance, an individual could have $250,000 insured at an FDIC-insured bank and an additional $250,000 insured at an NCUA-insured credit union.