What is deposit insurance -- and are you covered?

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In most cases your money is safe, but there are some caveats

The failure of a couple of banks last month sent a case of the jitters through a lot of folks. Not to the point where they started putting their money under the mattress, but still...

So, the logical questions that were raised include, is my money safe, how do I know, and what should I be doing?

The answer to the first question is, if your money -- up to $250,000 -- is in a bank insured by Federal Deposit Insurance Corporation (FDIC), you can be confident that it's safe.

What's covered and what's not

FDIC deposit insurance is backed by the full faith and credit of the United States government, and covers the following:

  • Checking accounts
  • Negotiable Order of Withdrawal (NOW) accounts
  • Savings accounts
  • Money Market Deposit Accounts (MMDAs)
  • Certificates of Deposit (CDs)
  • Cashier’s checks
  • Money orders
  • Other official items issued by an insured bank

On the other hand, FDIC deposit insurance does not cover:

  • Stock investments
  • Bond investments
  • Mutual funds
  • Life insurance policies
  • Annuities
  • Municipal securities
  • Safe deposit boxes or their contents
  • U.S. Treasury bills, bonds, or notes
  • Crypto assets

It's important to understand that non-bank companies and financial institutions that offer various banking services but do not have a banking license are never FDIC-insured.

Even if they are partners with insured banks, the money you send to a non-bank company is not FDIC insured unless the company deposits it in an insured bank.

What if my bank fails?

If your money in a failed bank is covered by FDIC and your account is less than $250,000, you should get full reimbursement from Uncle Sam.

You don’t really have to do anything to get your money as it'll be transferred to another FDIC bank and you’ll be notified about your new account.

More than $250,000 in a failed bank? You’ll be reimbursed that amount but you may or may not get the rest.

If you want to protect yourself from that $250,000 limit, here are a couple of suggestions from banking experts:

  • Split up your money by opening an account at a second FDIC member bank.
  • If you're using accounts that earn interest at a bank with only FDIC insurance, be sure your deposits are low enough that your balance with interest will be within that limit. Once an account reaches the $250,000 limit, you can open another new account at another institution.

While single, individually owned accounts are insured up to $250,000 total at FDIC member banks, joint accounts — with two or more owners — are insured up to $500,000 total. So to double the insured amount in deposit accounts at a single bank, you can add another owner.

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