What Bank Insures Millions of Dollars?

The safety of funds in financial institutions is a concern for depositors, especially those with substantial amounts. In the United States, a robust system of deposit insurance safeguards money in banks and credit unions, protecting it even if an institution fails. This system fosters public confidence, allowing individuals and businesses to save and invest. Understanding this protection helps depositors manage their funds effectively.

The Role of Deposit Insurance

Deposit insurance is administered by the Federal Deposit Insurance Corporation (FDIC), an independent agency established in 1933. Its purpose is to maintain stability and public confidence by insuring deposits and supervising financial institutions for safety. The FDIC does not rely on taxpayer money; its income comes from insurance premiums paid by insured banks and from interest earned on investments in U.S. government securities.

The standard insurance coverage provided by the FDIC is $250,000 per depositor, per insured bank, for each ownership category. This limit applies to all deposits a person holds in the same ownership category at one bank. For example, multiple checking or savings accounts at the same bank are combined under the single ownership category for insurance purposes.

FDIC insurance covers deposit accounts like checking, savings, money market deposit accounts, and Certificates of Deposit (CDs). It also covers official bank items like cashier’s checks and money orders. However, the FDIC does not insure investment products purchased through an insured bank. This distinction is important, as market-based products carry inherent risks not covered by deposit insurance.

Expanding Coverage Through Account Ownership

Depositors can increase insured amounts beyond the $250,000 limit at one bank by using different ownership categories. Each distinct ownership category at the same insured institution receives its own $250,000 coverage. This allows for multi-million dollar coverage without opening accounts at multiple banks.

Single accounts, owned by one person, include checking, savings, money market deposit accounts, and CDs. Joint accounts, owned by two or more people, are another category, with each co-owner insured up to $250,000 for their combined interests in all joint accounts at the same bank. For example, a married couple can have $250,000 each in their individual accounts, plus $500,000 in a joint account, totaling $1 million in coverage at one institution.

Other ownership categories include:

• Retirement accounts (e.g., Traditional IRAs, Roth IRAs, SEP IRAs, SIMPLE IRAs, self-directed 401(k)s) form a separate ownership category, each insured up to $250,000 per depositor.
• Revocable trust accounts (e.g., living trusts, Payable On Death (POD) accounts) are insured up to $250,000 for each unique beneficiary, up to five beneficiaries, potentially providing up to $1.25 million per owner.
• Irrevocable trust accounts also fall under the trust category, often insured up to $250,000 per beneficiary if specific conditions are met.
• Employee benefit plan accounts are another distinct category.

Strategies for Large Deposits

For sums exceeding single-institution coverage, strategies can ensure all funds are insured. One method involves distributing deposits across multiple separately insured banks. Each distinct bank provides full $250,000 per depositor, per ownership category coverage. This applies to distinct banks with separate charters, not just different branches of the same bank.

Another strategy for very large deposits is using deposit placement networks, such as the Certificate of Deposit Account Registry Service (CDARS) or Insured Cash Sweep (ICS). These networks allow a depositor to place a large sum with a single bank, which then distributes smaller amounts among a network of different FDIC-insured banks. This ensures each portion falls within the $250,000 insurance limit at each participating bank.

While funds spread across multiple institutions, the depositor maintains a relationship with only the primary bank, simplifying management. The primary bank handles all transactions and provides a single statement, while underlying deposits are held in various network banks, qualifying for full FDIC insurance at each. This method allows millions of dollars to be fully insured while maintaining a convenient banking experience.

Protecting Credit Union Funds and What is Not Covered

Credit unions operate under a similar robust deposit insurance system. Deposits in federally insured credit unions are protected by the National Credit Union Administration (NCUA) through its National Credit Union Share Insurance Fund (NCUSIF). The NCUSIF provides the same $250,000 coverage as FDIC insurance: per depositor, per federally insured credit union, for each ownership category. This ensures funds in credit union checking, savings, money market accounts, and share certificates are protected.

Despite comprehensive federal deposit insurance, some financial products and assets are not covered. Neither FDIC nor NCUA insurance protects investments like stocks, bonds, mutual funds, annuities, or life insurance policies. These products carry market risks and are not deposits. The contents of safe deposit boxes are also not covered.

Cryptocurrencies are not insured by the FDIC or NCUA. These assets operate outside the traditional banking system and lack federal deposit insurance. Understanding these boundaries helps depositors distinguish between insured deposits and other financial products with different risk levels and no federal guarantees.