What Is the FDIC Limit for Joint Accounts?
Understand FDIC insurance for joint bank accounts and how your total deposits are protected across various ownership types.
The Federal Deposit Insurance Corporation (FDIC) is a U.S. government agency. It insures deposits in banks and savings associations to maintain stability and public confidence in the financial system. This insurance protects consumers’ money if an insured bank fails, covering principal and interest up to the insurance limit.
Understanding Joint Account FDIC Coverage
A joint account is a deposit account owned by two or more people with equal withdrawal rights. The FDIC provides separate insurance coverage for deposits in different ownership categories, and joint accounts are one such category. The standard insurance amount for joint accounts is $250,000 per co-owner. This means a joint account with two co-owners can be insured up to $500,000.
The FDIC assumes each co-owner has an equal share of the account. For example, a joint certificate of deposit (CD) with $500,000 owned by two individuals would be fully insured, as each person’s $250,000 share falls within the coverage limit. All joint accounts held by the same co-owners at the same insured bank are combined for the $250,000 limit per co-owner. To qualify, co-owners must be natural persons with equal withdrawal rights, and their ownership must be genuine.
How Different Account Ownership Categories Are Insured
An individual can hold multiple accounts at the same FDIC-insured bank and qualify for more than $250,000 in total coverage. This is because the FDIC provides separate insurance coverage for deposits held in different ownership categories. Each distinct ownership category at an insured bank receives its own $250,000 insurance limit.
Common ownership categories include individual accounts and certain retirement accounts. An individual account, owned by one person, is insured up to $250,000. All single accounts held by the same person at the same bank are combined for this limit. Certain retirement accounts, such as IRAs and self-directed 401(k)s, are insured separately up to $250,000 per owner. This coverage applies to the aggregate of all such retirement accounts held by one person at the same bank.
Trust accounts also fall under a distinct ownership category. A trust owner’s deposits are insured up to $250,000 for each eligible beneficiary, up to a maximum of five beneficiaries per owner. Business accounts are generally insured up to $250,000 per entity, separate from the owners’ personal accounts. However, deposits of a sole proprietorship are insured with the owner’s personal funds under the single-ownership category.
Common Scenarios and Coverage Examples
If an individual has $250,000 in an individual savings account and $250,000 in an Individual Retirement Account (IRA) at the same bank, both amounts would be fully insured. This is because individual accounts and retirement accounts are distinct ownership categories, allowing for a total insured amount of $500,000 at that bank.
Mary and John have a joint savings account with $500,000 at Bank A. This account is fully insured because each co-owner’s $250,000 share falls within the per-owner limit for joint accounts. If Mary also has an individual checking account with $250,000 and John has an individual money market account with $250,000 at the same Bank A, their combined total coverage at that institution would be $1,000,000.
If a person sets up a trust account at Bank B with three eligible beneficiaries, the trust deposits would be insured up to $750,000 ($250,000 per beneficiary). If this person also holds an individual checking account with $250,000 at Bank B, their total insured deposits at Bank B would be $1,000,000.