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"Are Your Bank Accounts Fully Insured?" by Julie Jason

Originally published: April 28, 2023 (distributed by Andrews McMeel Syndication)

Given the recent turmoil in the banking industry, with two U.S. banks being taken over in March of this year (tinyurl.com/mrx7kdwn), it's a good time to review the Federal Deposit Insurance Corporation's coverage to make sure you understand what is and what isn't covered.

                You can find the FDIC's rules of coverage at tinyurl.com/2uj9vfw2. The types of deposit accounts that are covered include checking accounts, savings accounts, money market deposit accounts and certificates of deposit.

                A key factor involves the amount of coverage. As the FDIC states, "The standard deposit insurance amount is $250,000 per depositor, per insured bank, for each account ownership category." 

                "Per insured bank" means that if you have a checking account at one bank and a savings account at another bank, each is covered up to $250,000.

                "Account ownership" categories, especially at the same bank, might cause some confusion. The FDIC offers examples of a single account (accounts in one name) and joint accounts (accounts in two or more names), along with other types of accounts, to explain the insurance coverage (tinyurl.com/yj2z5zaw). The examples are helpful to get an understanding of how the coverage works -- and what to watch out for. 

                To avoid surprises, use EDIE, the FDIC's Electronic Deposit Insurance Estimator (tinyurl.com/mpsnuyhf). It can help you determine "how the insurance rules and limits apply to a depositor's specific group of deposit accounts -- what's insured and what portion (if any) exceeds coverage limits at that bank." You can input the details of your accounts at a given bank and the amount in those accounts. Once all the details have been put in, you can calculate the insurance coverage for the accounts.

                (Be aware that rule changes will take effect on April 1, 2024, for revocable and irrevocable trusts and mortgage servicing accounts -- see tinyurl.com/ycktanew for more details.)

                Also important is what FDIC insurance does NOT cover. That includes stock and bond investments, annuities, life insurance policies and safe deposit boxes and their contents. (As for cryptocurrencies, the FDIC explains in a fact sheet that it "does not insure assets issued by non-bank entities, such as crypto companies" (tinyurl.com/3zy5fz9p).)

                To make sure your bank is covered by FDIC insurance, use the FDIC's BankFind tool, which allows you to find FDIC-insured banks and their branches (tinyurl.com/ywmxsh6n). When you get a result from the tool, the information will include if and how long the bank has been FDIC insured. Make sure you have the correct spelling and proper spacing for your bank's name.

                Credit unions are not FDIC insured. Instead, the National Credit Union Administration (tinyurl.com/3b3f2tsx) insures more than 4,700 U.S. credit unions (tinyurl.com/4fhxwz9n). The insurance coverage is similar to the FDIC's (which has more than 4,680 insured banks as of April 21, 2023), but make sure to review the details if you have a credit union account.

                What happens to your accounts when an FDIC-insured bank does fail? 

                The FDIC has two roles (tinyurl.com/4pts9efx):

                As the insurer of bank deposits, "the FDIC pays insurance to depositors up to the insurance limit. Historically, the FDIC pays insurance within a few days after a bank closing, usually the next business day."

                -- As the receiver of the failed bank, "the FDIC assumes the task of selling/collecting the assets of the failed bank and settling its debts, including claims for deposits in excess of the insured limit." 

                Learn more by watching FDIC videos about deposit insurance coverage at tinyurl.com/yckvk6p3

                Finally, it helps to know that since the FDIC began insuring deposits in 1934, "no depositor has lost a penny of FDIC-insured funds as a result of an insured bank's failure." 

                That's good news, of course. But, realistically, you may still be at risk. Take the time now to understand your personal coverage. Are you fully insured?