FDIC: Coverage Limits

FDIC: Coverage Limits

FDIC stands for the Federal Deposit Insurance Corporation. It is an independent agency of the United States government that provides deposit insurance to depositors in U.S. banks and savings associations.

As of the last FDIC update in September 2021, the standard deposit insurance coverage provided by the FDIC is up to $250,000 per depositor, per insured bank, for each account ownership category.

Here are some key points to understand about FDIC insurance coverage limits:

1. Single Accounts

Deposits held in individual accounts are insured up to $250,000 per account owner at each insured bank. For example, if you have a checking account and a savings account in your name alone at the same bank, each account would be separately insured up to $250,000.

Example of a Scenario

Let’s assume you have the following deposit accounts at a single FDIC-insured bank:

1. Checking Account: $150,000
2. Savings Account: $200,000
3. Certificate of Deposit (CD): $400,000

To calculate your FDIC coverage for each account, we need to consider the $250,000 limit per depositor, per insured bank, for each account ownership category.

In this example, the FDIC coverage for your accounts would be as follows:

1. Checking Account: The full amount of $150,000 is within the coverage limit of $250,000, so the entire balance is insured.
2. Savings Account: The full amount of $200,000 is within the coverage limit of $250,000, so the entire balance is insured.
3. Certificate of Deposit (CD): Since the CD balance of $400,000 exceeds the coverage limit of $250,000, a portion of the deposit would not be covered by FDIC insurance. In this case, $250,000 of the CD balance is insured, and the remaining $150,000 is not covered.

Therefore, the total FDIC coverage for your accounts would be $150,000 (checking) + $200,000 (savings) + $250,000 (CD) = $600,000.

The remaining $150,000 of the CD balance that exceeds the FDIC coverage limit would be at risk in the event of the bank’s failure.

Remember that this is a simplified example, and it’s important to consider the specific details of your accounts and consult the FDIC or your financial institution for precise calculations and information on FDIC coverage limits.

2. Joint Accounts 

Deposits held in joint accounts with two or more account owners are insured up to $250,000 per co-owner at each insured bank. Each co-owner’s share of the joint account is insured separately. So, if you and your spouse have a joint savings account, the account would be insured up to $500,000 ($250,000 per co-owner).

Let’s consider a joint account shared between two individuals at a single FDIC-insured bank. Here are the details of the joint account:

1. Joint Savings Account: $400,000

For joint accounts, each co-owner’s share is insured separately up to $250,000 per co-owner, per insured bank. In this example, there are two co-owners, so we’ll calculate the FDIC coverage for each co-owner individually.

FDIC coverage for the joint account would be as follows:

1. Co-owner 1: Their share of the joint account is $200,000 (half of the total balance). This amount is within the FDIC coverage limit of $250,000 per co-owner. Therefore, the entire balance of $200,000 for Co-owner 1 is insured.
2. Co-owner 2: Their share of the joint account is also $200,000 (the other half of the total balance). Like Co-owner 1, this amount is within the FDIC coverage limit of $250,000 per co-owner. Hence, the entire balance of $200,000 for Co-owner 2 is insured.

Thus, for the joint account, both Co-owner 1 and Co-owner 2 have their full shares insured, resulting in a total FDIC coverage of $400,000 ($200,000 for each co-owner).

Please note that this is a simplified example, and specific factors or circumstances may affect FDIC coverage for joint accounts. It’s advisable to consult the FDIC or your financial institution for accurate calculations and details regarding FDIC coverage limits.

3. Revocable Trust Accounts

Deposits held in certain types of revocable trust accounts, such as living trusts or payable-on-death (POD) accounts, are insured up to $250,000 per beneficiary, per owner, at each insured bank. The coverage can vary based on the number of beneficiaries and the account owner’s interest in the trust.

4. Retirement Accounts

Certain retirement accounts, such as Traditional and Roth IRAs, are insured separately up to $250,000 per depositor, per insured bank. This limit applies to the total deposits across all IRA accounts held by the same person at the same bank.

FDIC coverage for retirement accounts, such as Traditional and Roth IRAs, is calculated separately from other account types. Let’s consider an example of a retirement account at a single FDIC-insured bank:

Traditional IRA: $300,000

For retirement accounts, the FDIC provides separate coverage up to $250,000 per depositor, per insured bank. In this example, the entire balance of the Traditional IRA is within the FDIC coverage limit.

Therefore, the FDIC coverage for the Traditional IRA would be $250,000, which is the maximum coverage available for an individual retirement account.

It’s important to note that the FDIC coverage for retirement accounts is separate from coverage for other account types. So, if you have other non-retirement accounts at the same bank, they would be insured separately up to $250,000 per depositor for each account ownership category.

Additionally, please keep in mind that the FDIC coverage limits are subject to change. It’s recommended to consult the FDIC or your financial institution for the most up-to-date information on FDIC coverage limits and specific details regarding your retirement account.

It’s important to note that if you have accounts across different ownership categories (e.g., individual, joint, and retirement accounts) at the same bank, each category is insured separately up to the $250,000 limit.

The FDIC also provides additional coverage for specific types of accounts, such as certain retirement accounts, trust accounts with more than five beneficiaries, and employee benefit plan accounts. These coverage limits may vary, so it’s advisable to consult the FDIC or your financial institution for specific details.

Please be aware that FDIC insurance limits are subject to change, so it’s recommended to visit the FDIC website or contact the FDIC directly for the most up-to-date information on coverage limits.