Fri. Jun 9th, 2023

Federal Bank Insurance

Federal bank insurance helps to ensure you can quickly access your funds if a bank fails, by paying depositors up to the insurance limit (principal and interest) as soon as possible after its collapse.

FDIC insurance applies only to deposits held at member banks and does not extend to mutual funds, annuities, life insurance policies and stocks.

Insured Deposits

Federal Bank Insurance, or deposit insurance, protects your funds in case your bank fails. It is automatic and at no cost to you; its full faith and credit of the United States government stands behind it as well.

The FDIC covers deposits dollar-for-dollar, both principal and interest. However, it does not insure mutual funds, annuities, stocks or bonds; nor any additional financial products and services banks might provide like investment advice or advisory services.

When maintaining large balances in your accounts, it’s essential that you understand how much federal deposit insurance your funds qualify for. With the FDIC-EDIE The Estimator tool at your disposal, this should not be difficult.

Check to see if your deposits are covered at other banks, which could increase the coverage you receive. Some banks participate in IntraFi Network Deposits (formerly CDARS), enabling you to transfer excess deposits between participating institutions within this program.

Some banks and brokerages provide additional protection through cash management accounts or sweep features at brokerages; you can learn more about this on the FDIC’s website.

Alternatively, if your deposits are distributed across multiple banks with each providing $250,000 coverage limits, satisfying certain criteria can allow for the accumulation of additional insurance coverage beyond $250,000 based on ownership category and can be determined through visiting the FDIC’s website.

An individual who deposits funds under various categories of legal ownership – for instance a corporation, partnership, unincorporated association and individual – will receive separate insurance coverage at each bank they hold funds with. The FDIC insures funds of owners, stockholders, partners or members up to $250,000.

Employee benefit plans and certain revocable trusts, including payable on death (POD) and Totten Trusts, can be insured under various ownership categories; however, these trusts typically do not qualify for pass-through insurance due to being inaccessible by beneficiaries or bond holders and thus their interests cannot be readily ascertained.

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Insured Banks

Banks are federally insured by the Federal Deposit Insurance Corporation (FDIC), a government agency. If one of their banks goes out of business, your checking and savings accounts may be insured up to $250,000 per depositor and up to $1 million overall for all types of deposits at each FDIC-insured bank.

Use the FDIC Electronic Deposit Insurance Estimator, or EDIE, to easily check whether or not your deposits are fully protected by the Federal Deposit Insurance Corporation. Its user-friendly interface will quickly help you assess if FDIC coverage exists at each bank where your deposits reside.

Deposit insurance can provide vital financial protection, especially for people living on tight budgets. Designed to safeguard individual and small-business savings in the event of bank failure, deposit insurance helps prevent a “bank run”, where customers line up at once to withdraw deposits from an insolvent bank.

Insurance should never be seen as a replacement for other forms of financial protection, for example theft, fraud or errors within a banking system. Furthermore, insurance does not shield a bank’s capital, which represents how much it has in reserves.

Therefore, it’s essential that individuals understand the different forms of protection afforded to banks as well as any limits of coverage they might offer. Furthermore, it would be prudent to research what investments fall under deposit insurance coverage so you can make educated financial decisions.

There are various accounts eligible for federal deposit insurance, such as savings accounts, CDs, money market deposit accounts and treasury bills. Some deposit products offer greater protection than others so it is wise to speak with your financial professional in order to ascertain which ones might best meet your needs.

Customers of an insured bank can rest easy knowing their deposits are insured up to the legal maximum limit; you should keep account balances as low as possible to prevent exceeding the FDIC insurance limit and receiving your money as quickly as possible.

Insured Accounts

The Federal Deposit Insurance Corporation (FDIC) serves as an additional safeguard for your savings and checking accounts, should a bank fail. When this occurs, they provide your deposits to another insured institution as quickly as possible.

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The FDIC provides insurance on funds held in member banks and financial institutions, such as credit unions. Their coverage extends to your savings, checking, money market accounts, certificates of deposit or any other account held with an insured bank.

FDIC-insured accounts are protected up to $250,000 at banks and up to $750,000 at credit unions, respectively. You can easily determine how much of your account is covered using their Electronic Deposit Insurance Estimator, or EDIE tool online.

Deposits insured up to $250,000 by the FDIC can also be found in single, joint, revocable and irrevocable trust accounts as well as certain retirement plans such as individual retirement accounts, Keogh plans and 457 plans. Furthermore, you can increase this coverage up to an additional $250,000 by spreading them across multiple banks insured by the FDIC.

If your deposits are at a federally insured credit union, an extra layer of deposit protection could come from the National Credit Union Share Insurance Fund (NDSF). This fund covers your shares but not loans from that credit union.

FDIC insurance protection can be invaluable during challenging economic times. People worry that their savings might be lost if their financial institutions become less stable than before.

Make sure your money is safely invested at an FDIC-insured institution for added peace of mind that should the institution fail.

Establishing accounts at one bank can maximize your insurance coverage and facilitate easy transference between accounts as necessary.

If your savings exceed $250,000 at an FDIC-insured bank, consider opening a second account or moving them to an FDIC-insured credit union. Or join a network of banks.

Coverage Limits

In the event of a bank failure, federal law mandates that the Federal Deposit Insurance Corporation (FDIC) is mandated by law to compensate depositors up to certain limits with their funds as part of an “FDIC Insurance policy.”

FDIC insurance covers deposits up to $250,000 per depositor, per bank and account ownership category – this amount includes principal and accrued interest as of the date of closing of an insured bank.

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However, not all banks provide equal levels of FDIC insurance protection. If you’re concerned about a particular bank, use BankFind to find out whether or not its coverage exists.

As opposed to other types of insurance, the FDIC insures deposits without consumers needing to apply or request it; coverage occurs automatically up to its specified limits when opening any type of deposit account at an FDIC-insured bank or savings association.

Notably, depositors have multiple ways to increase their FDIC insurance. Aside from increasing basic limits, depositors may also add deposit protection by titling their accounts or becoming joint owners.

Titling or adding joint owners to your accounts can provide more than $250,000 of protection at one bank. You can title these accounts under either your name, that of your spouse’s or both names if desired.

Add a beneficiary to your accounts as another way of safeguarding funds if there’s someone important who needs access to their inheritance in case of your passing. This could protect your funds as well.

As part of your estate plan, consider including estate-planning tools like revocable trusts or annuities for added tax deferral and asset protection should one or both account holders pass away or become incapacitated.

Use BankFind and speak to a financial professional for guidance when considering options to increase deposit protection. In addition, call the FDIC Consumer Hotline free of charge or contact Bank of Marin representatives directly for further advice and information.

Jeffrey Augers
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By Jeffrey Augers

Jeffrey Augers is a highly skilled and experienced financial analyst with over 12 years of experience in the finance industry. He has a proven track record of delivering exceptional financial insights and recommendations to clients, empowering them to make informed decisions and achieve their financial goals. Jeffrey holds a Bachelor's degree in Finance from the University of Michigan, and an MBA from the Wharton School of Business.