How Much Money Is Insured in a Bank?

Bank deposit insurance safeguards funds held in financial institutions, protecting consumers’ money from loss if a bank fails. Understanding this protection is important for individuals managing their financial assets, as it assures depositors their funds are available even during bank difficulties.

The Role of the FDIC and Standard Coverage

The Federal Deposit Insurance Corporation (FDIC) is an independent U.S. government agency that insures deposits in banks and savings associations. Its core mission is to maintain stability and public confidence in the nation’s financial system. The FDIC achieves this by insuring deposits, supervising financial institutions for safety, and managing failed bank receiverships.

The standard FDIC insurance amount is $250,000 per depositor, per insured bank, for each ownership category. This limit was permanently set in 2010 after temporary increases. It aims to protect most depositors, prevent widespread panic, and promote trust in the banking sector.

Accounts That Are Insured

FDIC insurance covers deposit products offered by insured banks. These accounts hold funds directly with the financial institution and are readily accessible or subject to specific withdrawal terms. Common examples include checking accounts for frequent transactions and savings accounts for accumulating funds and earning interest.

Money market deposit accounts (MMDAs) are also insured, offering features similar to savings accounts but often with higher interest rates and limited check-writing. Certificates of deposit (CDs), representing funds deposited for a fixed period at a fixed interest rate, are fully insured. All these deposit instruments are protected up to the standard coverage limit, securing principal and accrued interest.

Accounts That Are Not Insured

While many deposit accounts are protected, certain financial products and assets are not covered by FDIC insurance. Investment products like stocks, bonds, and mutual funds are not insured because they carry market risks and are not deposits. Annuities and life insurance policies also fall outside FDIC coverage.

Contents in safe deposit boxes are not FDIC-insured, as they are personal property stored at the bank, not deposited funds. U.S. Treasury securities are direct investments in government debt, not bank deposits, and thus not FDIC-insured. Digital assets like cryptocurrencies are also not covered by FDIC insurance.

Increasing Your Coverage

Depositors can increase their total insured amount beyond the standard $250,000 limit within a single bank by using different ownership categories. Each distinct ownership category at the same insured bank is separately insured up to $250,000. For example, a single account is insured separately from a joint account.

Retirement accounts, such as IRAs and 401(k)s, are another separate ownership category. Funds in these accounts are insured up to $250,000 per participant. Revocable trust accounts are insured for each unique beneficiary, up to $250,000 per beneficiary.

Irrevocable trust accounts are also insured separately based on each unique beneficiary’s interest. Business accounts, including corporations and partnerships, constitute another distinct ownership category, allowing an additional $250,000 in coverage. For example, a single person could have a single account ($250,000), a joint account with a spouse ($250,000 for their share), and an IRA ($250,000) all at the same bank, effectively insuring $750,000.

Bank Failure Process

When an insured bank fails, the FDIC acts swiftly to resolve the situation. The agency’s primary goal is to ensure depositors have rapid access to their insured funds. This resolution often involves transferring insured deposits to a healthy, acquiring financial institution.

If an immediate transfer is not feasible, the FDIC directly issues checks to depositors for their insured amounts. Depositors do not need to file a claim to receive their insured funds. The FDIC has ensured no depositor has lost insured funds since its inception in 1933.