Anyone who’s seen what I consider the best movie ever made – It’s a Wonderful Life– will remember the bank run that nearly put the town of Bedford Falls six feet under. Quick thinking kept that from happening in Bedford Falls, but during that time in history, bank runs took a serious toll on towns across America. From 1930-1933, nearly 10,000 banks failed or were suspended.
That’s why, in 1933, the Federal Deposit Insurance Corporation (FDIC) was created. According to the FDIC website, consumers haven’t lost “even one penny” of FDIC–insured money since then. Do you really know how much of your money is insured? You may know the basics, but the answer isn’t really cut and dried. If your assets are significant, there’s much more you should know to keep your money safe. Here’s some information you may need.
Are All Banks and Credit Unions Covered by FDIC?
The simple answer is no. In fact, credit unions aren’t covered by FDIC at all, but don’t worry. They have their own program, the National Credit Union Share Insurance Fund (NCUSIF). However, ask your credit union to be sure they do have NCUSIF coverage. As for banks, coverage depends on membership, so it’s important to check. If you don’t see the gold FDIC logo on the bank, take a look at the website. My bank displays the FDIC logo along the bottom and also on my statements, accompanied by a house symbol. You can also call your bank and ask, or call 1-877-ASK-FDIC (1-877-275-3342).
Are All Bank Accounts Covered in an FDIC-insured Bank?
The answer is no.
Basically “deposit accounts” are insured, including:
- Money market
- Certificates of deposit
- Cashier’s checks and money orders
- NOW accounts or interest-earning checking.
Excluded are most investment accounts, even if purchased through your FDIC-insured bank, such as:
- Mutual funds
- Life Insurance
- Securities (municipal, government, U.S. Treasury)
How Much of Your Deposits Is Covered?
Generally speaking, deposits are insured for up to $250,000 per account, per owner, at each bank. The details get more complicated for depositors with larger accounts. Here are some examples to help you figure what your actual coverage is:
- An account owned by one person, with no named beneficiaries, is covered for up to $250,000.
- Joint accounts with two or more owners, without named beneficiaries, are insured up to $250,000 per co-owner. So a married couple with an account totaling $400,000 would each be insured for half, or $200,000.
- For a joint account holding $500,000, each of the two co-owners would each be insured for $250,000.
- A joint account valued at $600,000 would provide each co-owner with $250,000 of FDIC insurance coverage ($500,000 total). The excess of $100,000 is not covered.
Certain trust accounts, some IRAs and other retirement accounts, may also be eligible for FDIC insurance, but check this with your bank.
How Can You Know for Sure What Your Coverage Is?
You can call your banker about your accounts or call the FDIC at 1-877-ASK-FDIC (1-877-275-3342).
Or… go online to ask EDIE. “EDIE the Estimator” is an anonymous tool provided by the FDIC to answer coverage questions. The acronym stands for Electronic Deposit Insurance Estimator. EDIE is used by individuals, businesses, and governments for free. Find EDIE here: www.fdic.gov/EDIE/calculator.html.
Unlike most insurance, you don’t have to apply for or pay for FDIC coverage. It’s automatic when you open an account in an FDIC-insured bank. FDIC member banks pay premiums to join the FDIC. Those funds are invested and the proceeds are used to pay claims when needed.
What If Your Bank Does Fail?
It happens. If you have more in your accounts than the coverage limits, you could lose part of it. When member banks fail, the FDIC helps arrange for financially strong banks to take them over, often quietly and without fanfare. In that case, you may lose nothing. If no buyer can be found, you may have to wait a while, but eventually you should get a check for your FDIC-insured funds.
If your money is in a bank that isn’t FDIC-insured, you may have to wait until the bank’s assets are sold to get a portion of your money back. You’ll likely be in line behind a long list of creditors. The FDIC estimates you’ll lose an average of 28 cents on the uninsured dollar you have deposited.
Although consumer trust in U.S. financial institutions is up, according to the Edelman’s 2016 Trust Barometer, the global financial services industry is less trusted, and iffy these days. In fact, among surveyed sectors (finances, food and beverages, telecommunications, and energy) finances are dead last. With a new sheriff in the White House, there could be regulatory changes in just about every sector. At this early point, only time will tell.
Best practice… check your FDIC coverage and talk to your financial advisor to see if you need to do some rearranging.
Teresa Ambord is a former accountant and Enrolled Agent with the IRS. Now she writes full time from her home, mostly for business, and about family when the inspiration strikes.