Most people don’t think twice about the safety of their money once it’s in the bank. But what happens if the bank fails? That’s where FDIC insurance comes in.
The Federal Deposit Insurance Corporation (FDIC) is a U.S. government agency that protects your bank deposits up to a certain limit. While it’s a great safety net, many people don’t fully understand the FDIC insurance limits and how they apply to different types of accounts.
Let’s break down exactly how FDIC insurance works, what the limits are, and how you can maximize your coverage.
What Is the FDIC Insurance Limit?
The standard FDIC insurance limit is $250,000 per depositor, per insured bank, per account category.
What does that mean? Let’s break it down:
- Per depositor – Each individual’s money is insured separately.
- Per insured bank – If you have accounts at different FDIC-insured banks, you get separate coverage at each one.
- Per account category – Some account types are insured separately from others, which means you can increase your coverage by using different types of accounts.
Example: If you have $400,000 in a single savings account at one bank, only $250,000 is insured, and you could lose $150,000 if the bank fails.
But if you structure your accounts correctly, you can increase your insured coverage beyond $250,000. Let’s explore how.
How FDIC Insurance Limits Apply to Different Account Types
1. Single Accounts – $250,000 Per Depositor, Per Bank
A single account is an account owned by one person with no co-owners. The FDIC covers up to $250,000 per person in single accounts at the same bank.
Example:
- Checking Account – $200,000
Fully covered - Savings Account – $100,000
Only $50,000 of the savings is covered (total exceeds $250K limit)
To fully protect your money, you could deposit the extra $150,000 into a different FDIC-insured bank.
2. Joint Accounts – $250,000 Per Owner
A joint account (owned by two or more people) gets $250,000 of coverage per co-owner.
Example:
- John and Sarah have a joint savings account with $500,000
- Since each owner is insured up to $250,000, the full $500,000 is covered
If they had $600,000 in the joint account, only $500,000 would be insured, and they could lose $100,000 if the bank failed.
3. Trust Accounts – Special Rules for Beneficiaries
Trust accounts are insured separately, but the coverage depends on the number of beneficiaries.
Example:
- A revocable trust with one owner and two beneficiaries gets $250,000 per beneficiary
- If there are three beneficiaries, the total coverage would be $750,000
Trust accounts can be a great way to increase FDIC coverage, but the rules are complex—so it’s best to check with your bank or FDIC.gov.
4. Retirement Accounts – $250,000 Per Person
Certain retirement accounts at banks are also FDIC-insured, including: Individual Retirement Accounts (IRAs) 401(k) accounts held in bank savings or CDs
However, investments in stocks, bonds, or mutual funds inside an IRA are not covered by FDIC insurance.
5. Business Accounts – $250,000 Per Entity
Business accounts also qualify for separate FDIC coverage.
- If you own a business checking account in your company’s name, it is insured up to $250,000 separately from your personal accounts.
- If you have multiple businesses, each business gets its own $250,000 in coverage.
How to Maximize Your FDIC Insurance Coverage
If you have more than $250,000 in deposits, you can structure your accounts to keep all your money protected. Here’s how:
1. Use Multiple FDIC-Insured Banks
FDIC insurance applies per bank, so if you have $500,000, you can keep $250,000 at Bank A and $250,000 at Bank B to stay fully covered.
2. Open Accounts Under Different Ownership Categories
Because FDIC insurance applies separately to different account types, you can increase coverage by using different ownership categories:
- Personal Checking Account – $250,000 covered
- Joint Account (with a spouse) – $500,000 covered ($250K each)
- IRA Savings Account – $250,000 covered
- Business Checking Account – $250,000 covered
Total FDIC-covered deposits in this scenario: $1,250,000
3. Consider a Trust Account
If you have multiple beneficiaries, a trust account can increase your coverage significantly.
For example, a trust with four beneficiaries could be insured for $1,000,000 ($250K per beneficiary).
4. Use a CDARS or IntraFi Network
Some banks offer programs like CDARS (Certificate of Deposit Account Registry Service) or IntraFi that spread your deposits across multiple banks while keeping your money in one place. This allows you to exceed the $250,000 limit without opening accounts at different banks yourself.
Final Thoughts: Protecting Your Money with FDIC Insurance
FDIC insurance is one of the most important safeguards for your money, but understanding its limits and how to maximize your coverage is key.
Key Takeaways:
FDIC insures up to $250,000 per depositor, per insured bank, per account type Joint accounts, business accounts, and trust accounts can provide additional coverage Using multiple banks is a simple way to protect deposits over $250,000 Retirement accounts at banks are covered, but investments are NOT insured Spreading money across different ownership categories can increase protection
By structuring your accounts wisely, you can keep all your deposits fully insured and safe—no matter what happens to your bank.
Do you have deposits over $250,000? Need help figuring out the best way to structure your accounts? Let me know in the comments! 