Let's get personal about FDIC Limits and Protecting Your Bank Deposits

Presented by Nicole Cannone Wegman, CFP ®, Director of Financial Planning

In this Let’s Get Personal post we'll explore what FDIC limits are, how they work, and what steps you can take to ensure that your bank deposits are protected.

With recent news about bank failures, it's natural to be concerned about the safety of your deposits. But did you know that the FDIC protects any money you have deposited in insured bank accounts up to $250,000 per account holder in the unlikely event of an insured bank failure?

What are FDIC limits?

The FDIC is an independent U.S. government agency that provides deposit insurance to protect depositors in the event that an insured bank or savings institution fails. FDIC limits refer to the amount of coverage that depositors are entitled to receive if their bank fails.

Currently, the FDIC insures deposits up to $250,000 per depositor, per insured bank. This means that if you have less than $250,000 in a single insured bank, your deposits are fully covered. If you have more than $250,000 in one account, the excess amount may not be insured. However, there are ways to increase your coverage, such as opening additional accounts or using different ownership categories (more on that later).

For joint accounts, each account holder is entitled to $250,000 in coverage. This means that a joint account with two account holders would have $500,000 in coverage.

How do FDIC limits work?

When a bank fails, the FDIC steps in to provide deposit insurance coverage to eligible depositors. The amount of coverage that each depositor receives depends on the amount of their deposits and the ownership category of their accounts.

FDIC limits apply to all types of deposit accounts, including checking accounts, savings accounts, money market accounts, and certificates of deposit (CDs). The coverage applies to both principal and accrued interest up to the date of the bank's failure.

It's important to note that FDIC limits are per depositor, per insured bank. This means that if you have multiple accounts at the same bank, the FDIC will add up the balances of all your accounts and insure them up to the $250,000 limit. If you have accounts at different banks, each bank will provide its own FDIC coverage up to $250,000.

What steps can you take to ensure your deposits are protected?

While the FDIC provides deposit insurance coverage, there are steps you can take to ensure that your deposits are fully protected. Here are a few tips:

Check the FDIC status of your bank: You can check if your bank is FDIC-insured by using the FDIC's BankFind tool. If your bank is not insured, you should consider moving your deposits to an insured bank.

Spread your deposits across multiple banks: If you have more than $250,000 to deposit, consider opening accounts at multiple banks. This way, you can ensure that all your deposits are fully covered by FDIC insurance.

Use different ownership categories: If you have more than $250,000 in deposits, you can increase your FDIC coverage by using different ownership categories. For example, you could open a joint account with a spouse or family member, or you could open accounts in different legal entities, such as a revocable trust or a business account.

Keep track of your deposits: Make sure to keep track of your deposits at each bank to ensure that you stay within the FDIC coverage limits.

While news about bank failures can be alarming, knowing about FDIC limits and taking steps to protect your deposits can give you peace of mind. By following the tips outlined in this post, you can ensure that your money is safe and secure in insured bank accounts.

As always, if you have any questions or concerns, don't hesitate to reach out to your Element team for guidance.