Bank Depositor Insurance

The Federal Deposit Insurance Corporation (the "FDIC") insures deposit accounts at its member banks and savings & loan associations. The National Credit Union Share Insurance Fund insures the deposit accounts of credit union members at federal credit unions and some state credit unions. There are similarities between the two kinds of insurance coverage, but there are also important differences. If you have questions about insurance coverage for your deposit accounts at a credit union, please see the FAQs about Credit Unions.

This information is adapted from the FDIC’s website. As with many government-sponsored websites, the information is not only reliable and up-to-date, but also searchable and understandable.

How are the FDIC rules changing?

On Friday, October 3, 2008, President Bush signed the $700 billion bailout package (or "rescue plan," depending on your point of view) into law. Among its many provisions: significant but temporary increases in FDIC coverage for certain bank accounts at FDIC member banks.

The insurance limits on individual accounts, on joint accounts, and on trust accounts have increased to $250,000, but only through December 31, 2013. The insurance limit on Individual Retirement Accounts (IRAs) remains unchanged, at $250,000. (Check the FDIC website for more details on what restrictions apply). There are a few important things to remember:

  • FDIC insurance only applies if your bank FAILS and federal regulators take control of it. If your bank is failing and it merges with another bank, then you will continue to have FDIC insurance coverage through your former bank for a period of six months following the merger. You should use that time to evaluate whether all of your funds on deposit are indeed within the FDIC coverage limits, and make changes if necessary.
  • The new coverage limits work the same way as the old limits did: FDIC will aggregate all of your individual accounts at a failed bank and cover the first $250,000 on deposit. Any amount in excess of $250,000 will not be insured and you may not be able to recover it. Similar rules apply to joint accounts and trust accounts.
  • As before, FDIC insurance coverage applies to checking and savings accounts, money market deposit accounts, and certificates of deposit. The FDIC does not insure other financial products, such as stocks and bonds, mutual fund shares, life insurance policies, annuities or municipal securities.
  • Additionally, the FDIC will provide unlimited coverage for Non-Interest Bearing Transaction Accounts, but only for accounts at those FDIC member banks who elect to participate in the FDIC's "Temporary Liquidity Guarantee Program." If you are in doubt whether your account qualifies for this special coverage, ask your bank, or check the FDIC's website. The unlimited coverage for Non-Interest Bearing Transaction Accounts is only in effect through December 31, 2010.
  • Remember: these changes are temporary: The higher insurance coverage will remain in effect only until December 31, 2013.

For the balance of this FAQ, we will occasionally refer to "the covered amount." By that we usually mean $250,000 through December 31, 2013, and $100,000 thereafter. Of course, Congress and the new administration may well extend or modify the increased coverage amount; we expect to update this information to keep it current.

Is my bank covered?
Member banks are required to display the FDIC symbol. If you’re not sure whether your bank is insured by the FDIC, check the FDIC website for a list of insured banks, or call the FDIC help line at 1-877-275-3342.

Am I covered?
The FDIC insures deposit accounts at its member banks and savings and loan associations, in the event of a failure. The basic insurance amount is $100,000 ($250,000 through December 31, 2013-- see above) per depositor (also known as the owner of the account), per insured bank.

Generally, the bank must be aware of your existence – either as an account owner or as the beneficiary of a trust account – in order for you to be insured. You must be clearly identified in bank documents (signature card, certificates of deposit, passbooks, accounts ledgers) in order to be eligible. Account statements, deposit slips and cancelled checks are not considered deposit account records for purposes of determining deposit insurance coverage.

What kind of accounts are covered?
The FDIC covers deposits, dollar for dollar, up to a certain limit. If you have funds on deposit that exceed the insurance coverage amounts, you might be able to recover the excess but it could take months or years to do so.

Checking, savings, NOW accounts, money market accounts, and certificates of deposit ARE insured.

Mutual funds, stocks and bonds, life insurance policies, annuities ARE NOT insured by the FDIC, even if you bought them from your bank.

Contents of safe deposit boxes at your bank are not insured. (See below).

How much coverage do I have?
The basic insurance amount is $100,000 ($250,000 through December 31, 2013 -- see above) per depositor, per insured bank. This means that your deposits, up to the covered amount, will be insured, dollar for dollar, if your bank fails. Generally, funds are available within a few business days after a bank failure. If there are bank assets available to cover your UNINSURED funds, it could take months or years to receive payment.

The basic insurance amount applies to accounts at more than one branch of the same bank, including internet bank accounts, even if the internet banking part of your bank goes by another name.

If you have more than the covered amount on deposit, you may still be eligible for higher coverage, depending on the nature of the accounts.

What if I have more than $100,000 (or $250,000) on deposit at a failed bank?
Even if you have more than the covered amount on deposit, you may still be eligible for greater coverage, depending on the nature and titling of the accounts.

How does the FDIC calculate insurance for my individually owned accounts?
Individually owned checking, savings, NOW, money market, CDs and accounts for a sole proprietorship are all included under this category. Accounts established for your benefit, such as accounts established by an agent, custodian, nominee, guardian, or conservator are included in this category -- so, for example, an account established for the benefit of a minor under the Uniform Transfers to Minors Act, are attributed to the minor, and not the custodian. 

Amounts in each of your individual accounts are aggregated and the first $100,000 (or $250,000) is insured.

If your single account contains a "Payable on Death" designation, it is considered a revocable trust account, and will be aggregated with your other revocable trust accounts for the purposes of determining your coverage.  See the section on Revocable Trust Accounts below for more details.

How does the FDIC calculate insurance for my jointly owned accounts?
Accounts owned by two or more people can be insured for up to the covered amount per owner. In order to qualify, all owners of a joint account must have equal rights of withdrawal (there are some exceptions if one joint owner is a minor). All owners must sign the account documents (usually, a signature card). The FDIC will assume every owner of a joint account owns an equal share of the account, unless bank documents indicate otherwise. Amounts you own in each joint account are aggregated with the amounts in every other joint account you own, and the first $100,000 (or $250,000) is insured.

If all criteria for a joint account are not satisfied, then your share in the joint account will be aggregated with amounts in your individual accounts, and the first $100,000 (or $250,000) is insured.

If your joint account contains a "Payable on Death" designation, it is considered a revocable trust account, and will be aggregated with your other revocable trust accounts for the purposes of determining your coverage.  See the section on Revocable Trust Accounts below for more details.

Are my retirement accounts insured? How much?
There are different rules for banks and credit unions. If you have questions concerning a Retirement Account that is on deposit at a credit union, please see our FAQs about Credit Unions.

Traditional IRAs, Roth IRAs, SEP IRAs, SIMPLE IRAs, §457 deferred compensation plans, self-directed defined contributions, and self-directed Keogh (or H.R. 10 plan) accounts owned by a single owner are aggregated and insured up to $250,000. Unlike the higher coverage amounts for single, joint, and trust accounts, the higher coverage amounts for retirement accounts are permanent, and will not change on January 1, 2014. 

Insurance coverage of retirement accounts is not increased by naming beneficiaries.

Note: Health Savings Accounts, Medical Savings Accounts, Coverdell Education Savings Accounts (formerly known as Educational IRAs), and 403(b) retirement accounts are not eligible for this increased insurance coverage.  Instead, these kinds of accounts may be aggregated with the owner's single accounts or trust accounts for the purposes of determining coverage.

What if my account is "payable on death" to someone else?
Informal revocable trust accounts, such as testamentary accounts, Totten trust accounts, "in trust for" accounts, and "payable on death" accounts are insured on a per account owner, per beneficiary basis. If there are two or more owners of the account, each owner can be insured up to the covered amount per beneficiary. Beneficiaries must be clearly identified in bank documents (signature card, certificates of deposit, passbooks, accounts ledgers).

To receive coverage, a beneficiary must be: a living person, a charity or a non-profit organization, as those institutions are defined by the Internal Revenue Service. Categories like "my children" or "my issue" are acceptable, so long as the  people who fall in these categories are readily identifiable.

There are two methods for calculating the maximum coverage for revocable trust accounts.  If there are five or fewer beneficiaries, the maximum coverage available is $250,000 per beneficiary (or $100,000 after January 1, 2014).  If there are six or more beneficiaries, and every beneficiary's interest is equal to every other beneficiary's interest, then each beneficiary's interest is covered, up to a maximum of $250,000 per beneficiary.  If the beneficiaries' interests are not equal, then coverage is the greater of the sum of each beneficiary's interest, up to $250,000 per beneficiary, or the sum of $1.25 million dollars.

What about accounts established in the name of my Family Trust?
Accounts established in the name of "Formal" Revocable Living Trusts, such as Family Trusts are insured up to the covered amount per owner, per  beneficiary. To receive coverage, a beneficiary must be: a living person, a charity or a non-profit organization, as those institutions are defined by the Internal Revenue Service.  For purposes of calculating the amount of coverage, the trust owners themselves (Trustors/Settlors/Grantors) are not counted as beneficiaries.

The account name should indicate the existence of a trust relationship and the names of the Trustors/Settlors/Grantors must be clearly identified in the account documents. In addition, the trustee must have signed the account signature card. Beneficiaries must be clearly identifiable in trust documents, but need not be listed on the account documents.  The interest granted to a beneficiary who is not clearly identified in the bank documents will instead be aggregated with the Trustor/Settlor/Grantor's individual accounts on deposit, if any, and insured up to the covered amount.

The per beneficiary coverage is available only to those beneficiaries who are entitled to a share of trust assets upon the death of the trust owner. For example, if your trust is to be distributed in equal shares to your children upon your death, and further states that if a child predeceases you, his or her share will be distributed to his or her children, then your child is a beneficiary (and his or her interest is insured up to $100,000 -- or, until December 31, 2013, $250,000), but your grandchildren are not. If, at the time of the bank failure, your child has predeceased you, then each grandchild’s share would be insured up to the covered amount.

The calculation of per beneficiary maximum coverage is the same for formal and informal revocable trusts.  See the section on Informal Revocable Trusts for more details.

If you retain an interest in the trust (a life estate), the FDIC will calculate its value and insure it up to the covered amount.

My spouse and I created a revocable trust, but now my spouse has died. What insurance coverage applies now?
Many, but not all, family trusts provide that upon the death of a spouse, the revocable family trust splits into two trusts, one of which becomes irrevocable. Alternatively, some trusts become irrevocable upon the death of the last living Trustor/Settlor/Grantor. Different coverage rules apply to revocable and irrevocable trusts, even though the beneficiaries of the two trusts may be the same people.

Irrevocable Trust Accounts can be insured up to the covered amount per beneficiary, under certain conditions. If, however, the trustee has the discretion to invade trust principal – for example, to pay the medical expenses of the Trustor/Settlor/Grantor’s surviving spouse – then the per beneficiary benefit does not apply, and the trust account will be only be insured up to the covered amount. Also, if the trust gives the trustee or a beneficiary the power to allocate trust assets among beneficiaries, the per beneficiary benefit does not apply. Because so many irrevocable trusts contain one or both of these characteristics, it is more likely that your irrevocable trust would only be insured up to the covered amount.

What happens if I maintain an account as a fiduciary for someone else?
Accounts opened and maintained by a guardian, conservator, on behalf of a ward, or by an agent, nominee, custodian or executor must clearly indicate the fiduciary relationship in the account records. Such accounts are counted as the individual account of the ward, principal, minor child, or decedent, and aggregated with any other individual accounts owned by that person, and insured up to the covered amount.

The amount in such an account is not aggregated with the fiduciary’s individual accounts, if any, at the same bank.

What if I maintain business accounts at the bank as well as individual accounts?
If you have an account for your sole proprietorship, the balance will be aggregated with your individual accounts for purposes of determining coverage.

All deposits owned by a partnership, a corporation, or an unincorporated association are aggregated and insured up to the covered amount. These deposits are not aggregated with the deposits of the individual partners or corporate officers, provided the corporation, partnership or unincorporated association is engaged in an "independent activity," and is not solely established for the purpose of increasing insurance coverage under the FDIC.

What if the account holder has died?
If the bank account owner dies and the bank fails, the bank maintains insurance coverage for a period of six months following the account owner’s date of death, or less if the account is restructured during that interval. After six months, or as soon as the account is restructured, the available insurance coverage is determined according to the actual ownership of the accounts.

Accounts maintained by the decedent's estate are insured up to a maximum of $250,000 (or $100,000 after January 1, 2014).  There is no additional per beneficiary coverage.  When aggregating funds on deposit to determine insurance coverage, the decedent's account is attributable to the decedent, and not to the Personal Representative, Executor, or Administrator.  See the discussion of fiduciary accounts above.

What happens to my safe deposit box if the bank fails?
Safe deposit boxes and their contents are not insured. In the event of a bank failure, the FDIC may arrange for an acquiring bank to take over the failed bank’s offices, including locations with safe deposit boxes. If the FDIC fails to find an acquiring bank to take over the failed bank, then you will receive instructions on how to access the safe deposit box and remove its contents.

What happens if my bank merges with another bank and I have accounts at both?
If your bank is acquired by another bank, the insurance on your deposits at the "assumed bank" will continue in effect for a period of six months. Your deposits at the acquiring bank will be insured separately, also for a period of six months. You should use this time to determine the aggregate amount of your deposits at the newly merged bank and restructure your accounts, if it appears that you exceed the coverage limits.

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