Are Your Bank Accounts Protected?

Bank Teller

You receive a check for $200,000 and another for $100,000. You deposit them both in to your personal checking account that already has a balance of $5,000. Your account now has a balance of $305,000. If the bank fails, would your deposits be covered? In this case, $55,000 would be at risk.

The Federal Deposit Insurance Corporation (FDIC) is an agency of the government that protects you against the loss of your deposits (including principal and accrued interest) in the event of bank failure. The standard deposit insurance amount is $250,000 per depositor per bank for each account ownership category. Only certain accounts types are covered by the FDIC:

FDIC-Insured Accounts
Checking
Savings
Money Market
Certificate of Deposits
NOW accounts
Cashier’s checks, money orders, and other official items issued by a bank
Accounts Not Insured by the FDIC
Stock investments
Bond investments
Mutual funds
Life Insurance policies
Annuities
Municipal securities
Safe deposit boxes or their contents
U.S. Treasury bills, bonds, or note

It is important to monitor your accounts and make sure they fall within the limits for coverage. If you exceed the limit you may want to consider moving the excess to another ownership category account or to another bank. With a combination of accounts, you could be covered for more than $250,000 at one financial institution. Below is a chart from the FDIC that summarizes the account ownership categories and the limits of coverage for each:

FDIC Deposit Insurance Coverage Limits by Account Ownership Category
Single Accounts (Owned by One Person) $250,000 per owner
Joint Accounts (Owned by Two or More Persons) $250,000 per co-owner
Certain Retirement Accounts (Includes IRAs) $250,000 per owner
Revocable Trust Accounts $250,000 per owner per unique beneficiary
Corporation, Partnership and Unincorporated Association Accounts $250,000 per corporation, partnership or unincorporated association
Irrevocable Trust Accounts $250,000 for the non-contingent interest of each unique beneficiary
Employee Benefit Plan Accounts $250,000 for the non-contingent interest of each plan participant
Government Accounts $250,000 per official custodian (more coverage available subject to specific conditions)

Consider having an account for each family member (including children). Joint accounts are insured separately from single accounts so you can also have a joint account with your spouse, your child, or other individual that would be covered up to $500,000. Revocable trusts are covered per beneficiary – 4 beneficiaries would give you a $1,000,000 limit.

Here is an example of a way to structure multiple accounts to get the most benefit from the FDIC insurance:

You have a single ownership account with a $305,000 balance ($250,000 FDIC coverage), a joint checking account with your spouse of $510,000 ($500,000 FDIC coverage), an IRA account with $400,000 ($250,000 FDIC coverage), and a revocable trust account with two beneficiaries with a balance of $600,000 ($500,000 FDIC coverage). Your FDIC insured total for all accounts would be $1,500,000 and $315,000 would be uninsured. So you would probably want to consider moving the $315,000 of excess funds to another institution.

Not all banks are covered by the FDIC. To verify that your bank is covered please visit the following link: https://research.fdic.gov/bankfind/

The FDIC provides a tool that will help you estimate what your current insurance coverage is at the following link: www.fdic.gov/edie.

When it comes to your money you must be sure you’re covered for the entirety of your assets. Fair Anderson and Langerman, a Las Vegas CPA firm, can consult with you on how to best protect your financial future. Call 702-870-7999 for more information.

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