The FDIC provides insurance coverage to your money under deposit insurance when your money is placed in a bank that is FDIC-insured. This coverage kicks in if the bank experiences a failure. Each depositor is insured at each bank for each ownership of an account in the amount of up to $250,000. No additional coverage must be purchased. In deposit accounts, coverage is automatic.
Are My Accounts Covered?
The FDIC covers the traditional types of deposit accounts. These include checking accounts, savings accounts, Negotiable Order of Withdrawal (NOW) accounts, Money Market Deposit Accounts (MMDAs), Certificates of Deposits (CDs), and prepaid cards if the requirements of the FDIC are met on that card. Additionally, Cashier’s checks and money orders that are issued by a bank are backed by FDIC insurance. In order to determine when coverage is granted, consider the following:
- All single accounts at an FDIC-insured bank that are directly owned by one person are added together and the total insurance limit for all – combined – is the amount up to $250,000.
- All joint accounts that have equal co-owners at the same bank will be added together and covered up to $250,000.
- All retirement-based accounts that are owned by the same person at the same bank will be added together and insured up to $250,000 by the FDIC.
- Revocable trust accounts owned by the same person at the same bank is added together and covered up to $250,000.
- Irrevocable trust accounts are added up – regardless of the beneficiaries listed – and covered up to $250,000.
- Employee Benefit Plan accounts are covered up to $250,000 per bank. Plans that include welfare plans and those that have health plans are provided with $250,000 for the entire plan.
- All deposits that are owned by a corporation, an unincorporated association, or a partnership at one bank are added up and them provided with coverage up to $250,000; however, this is separate from the personal accounts of the members/owners of the corporation, unincorporated association, and/or partnership.
- Government accounts are insured up to a minimum of $250,000 for each bank.
What is FDIC Deposit Insurance?
FDIC deposit insurance aids consumers by allowing them to confidently put their money into any of the thousands of FDIC-insured banks by backing those funds with the full faith and the distinguished credit associated with the United States Government.
The seal of this insurance coverage has been in effect since the year of 1933.
That seal now reflects or symbolizes the general level of safety and of security of the financial institutions that abound throughout the country.
What Types of Accounts Are Not Covered by FDIC Insurance?
The FDIC does not cover the following types of accounts:
- Investments in Bonds
- Investments in Stock
- Cryptocurrency Exchanges
- Life Insurance Policies
- Municipal Securities
- Annuities
- U.S Treasury Bills
- U.S Treasury Bonds
- U.S Treasury Notes
- Safe Deposit Boxes and Associated Contents, Therein
How Do I Apply for FDIC Coverage?
As a depositor, you do not need to apply for insurance coverage with the FDIC. You must simply ensure that you are placing in your money in a covered account at an FDIC-insured bank within the United States.
Once a deposit is officially opened at a financial institution that is covered by the FDIC, the coverage is provided automatically and at no additional charge.
What are the Coverage Limits of FDIC Insurance?
As mentioned previously, the standard coverage limit of FDIC insurance is $250,000. That is per depositor, per bank, for each ownership in an account category.
For different categories, all requirements must be met and the depositor will qualify for coverage limits over $250,000.
For accounts in the same category, all of the accounts are added together and the coverage limit is up to the standard of the base of $250,000.
What is a Bank Failure?
A bank failure occurs when a federal or state regulating agency closes that bank. In most instances, this happens when that financial institution is unable to meet its obligations. When a bank failure occurs, FDIC insurance kicks in to quickly cover the balance of each account that a depositor has. The maximum amount of coverage is $250,000.
During this time, the FDIC acts as an insurer and as a receiver. In the insurer’s capacity, it pays insurance to depositors. In the receiver’s capacity, it collects and sells all of the assets associated with the bank that has failed in an effort to settle its debts. These include claims for deposit accounts that exceed the insurance coverage limit provided by FDIC insurance.
Is Money Covered in a Nonbank Company That Includes Deposit in FDIC-Insured Bank?
If you have opened an account with a nonbank company and that company claims your funds will be placed into a bank that is covered by FDIC insurance, you may be eligible for “pass-through” coverage. This will depend on the company’s adherence to the requirements of the FDIC.
Additionally, you must understand that coverage is not provided if the company fails or if bankruptcy is filed.
Fake Banks and Fake Apps on the Rise
You should know and understand that there are many fake banks and fake apps coming into the marketplace. You should always be alert for the potential of scams.
To determine if a particular bank or app company is covered by the FDIC, you should use the BankFind tool that is available online. If you are unable to do this, you should contact the FDIC directly by calling 877-ASK-FDIC/877-275-3342.
The website ask.fdic.gov may also be utilized to confirm FDIC-insured financial institutions.
What are Deposit Products and Ownership Categories?
Deposit products are actual accounts – such as a checking account and a savings account. These are insured by the FDIC. The amount of coverage you qualify for will depend on the ownership category of the account or deposit product.
Examples of ownership categories include single accounts, joint accounts, and trust accounts.
If you have a question about your deposit products and the ownership categories, you should direct them to a professional at the banking institution that you use.
How Are Prepaid Cards Insured by the FDIC?
Prepaid cards that are registered with the issuer are directly insured by the FDIC when certain types of requirements are met. The funds of the card, for example, must be deposited into a bank that is insured with the FDIC. If the holding bank fails, the funds associated with that prepaid card will be covered. It is important to understand that the FDIC does not cover lost prepaid cards, stolen prepaid cards, or prepaid cards whose company has officially declared bankruptcy.
How Do I Check for Coverage of My Accounts?
You may check to see if your accounts are covered by the FDIC by accessing the Electronic Deposit Insurance Estimator that is provided by the FDIC. Once there, simply input the information about the various accounts that you own. In addition to this, you may contact the Support Center of the FDIC or you may call the FDIC directly at 1-877-ASK-FDIC/1-877-275-3342. The insurance specialists will be able to help you determine both if you are covered and calculate your coverage amount.
Contact Us Today
If you want to ensure that your hard-earned money is properly protected, you may open a deposit account here at Somerville Bank. All qualifying accounts available at our financial institution are fully backed by and covered by the FDIC. We have a solid history and ensure maximum protection on all accounts held by our depositors. For more information, call or visit one of our many locations today.
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