Introduction
When you deposit money into a bank account, you expect it to be safe. But what happens if your bank fails? That's where FDIC insurance comes in. FDIC stands for Federal Deposit Insurance Corporation. It's an independent agency of the U.S. government that protects you against the loss of your deposits in case your bank goes belly up.
The FDIC was created in 1933 during the Great Depression, a time when thousands of banks failed, and many Americans lost their life savings. Since the FDIC began operations, no depositor has lost a single penny of insured deposits. This peace of mind is invaluable, allowing you to confidently save and manage your money without worrying about the stability of your financial institution.
What Does FDIC Insurance Cover?
FDIC insurance covers various deposit accounts, including:
- Checking accounts: Your primary transaction account for deposits, withdrawals, and payments.
- Savings accounts: Accounts designed for saving money, typically earning interest.
- Money market accounts: Accounts that often combine features of checking and savings accounts.
- Certificates of deposit (CDs): Time deposits that typically offer higher interest rates in exchange for holding your funds for a fixed period.
For each deposit ownership category, the standard insurance amount is $250,000 per insured bank. This means that if you have multiple accounts at the same bank that total more than $250,000, you're only covered up to that amount. However, if your accounts exceed this limit, you might explore options like distributing your funds across multiple institutions or utilizing different account ownership categories to maximize your coverage.
What Does FDIC Insurance Not Cover?
It's important to note that FDIC insurance does not cover all financial products. Here are some common exceptions:
- Investments in stocks, bonds, mutual funds, and annuities: These investment products are subject to market risk and are not insured by the FDIC, even if purchased through your bank.
- Safe deposit boxes: While banks often provide safe deposit boxes to store valuables, the contents are not covered by FDIC insurance. Consider insuring these items separately through a private insurance company.
- U.S. Treasury securities: While generally considered low-risk, these government securities are not covered by the FDIC. They have their own safeguards and guarantees.
How to Make Sure Your Money Is Insured
The good news is that you don't have to do anything special to be covered by FDIC insurance. If you bank with an FDIC-insured institution, your eligible deposits are automatically protected up to the coverage limits. Look for the FDIC logo at bank branches or on their websites. You can also use the FDIC's BankFind tool to verify a bank's insurance status.
