The FDIC insures certain types of bank accounts in the US up to $250,000 per insured banking institution, per account category. The coverage is determined based on ownership, and each person can have $250,000 in coverage across all individual accounts at a bank. Special cases and exceptions exist, and seeking outside help is recommended to ensure money isn’t left in uninsured accounts.
The Federal Deposit Insurance Corporation (FDIC) is an organization that guarantees certain types of bank accounts in the United States. Some investments such as mutual funds, stocks, and life insurance policies are not insured at all, and other investment accounts are covered based on a series of FDIC limits. These limits can get complicated, although the general rule of thumb is that the FDIC insures $250,000 United States Dollars (USD) per insured banking institution, per account category. This means that an individual can have two or more fully insured accounts at a bank, as long as each is a different type of account. Some of the basic account types covered by the FDIC include single, joint, and revocable trusts, and some retirement accounts, including individual retirement accounts (IRAs).
For purposes of determining FDIC limits, the categories do not refer to account types such as checking, savings, and certificates of deposit (CDs). As far as the FDIC is concerned, a checking account and a savings account are functionally identical. Instead, insurance coverage is determined based on ownership, and each person can typically have $250,000 USD in coverage across all individual accounts at a bank, regardless of whether they are savings, checking, or other.
Each account category is generally considered separately when determining FDIC limits. A person cannot have two individual accounts at a bank that are worth $250,000 USD and expect to be covered, although that same person could have an individual account, a joint account, be part of a trust and seek coverage protection of $250,000 USD per account category. In the case of joint and trust accounts, each owner can be insured for $250,000 USD, allowing the account to be worth $500,000 USD or more.
Certain retirement accounts and revocable trusts may be subject to other restrictions, and FDIC limits may also be affected by an account that has beneficiaries. While the basic principles behind the FDIC limits are relatively simple, there are a number of exceptions and special cases. There are even certain types of interest-free accounts that have no insurance limits.
Although it is possible to determine whether or not an investment is covered within FDIC limits without outside help, it may be wise to retain the services of a financial planner. The FDIC also offers an automated service on its website to help determine if an individual’s accounts exceed FDIC limits. Seeking outside help from a financial planner, accountant, or the FDIC itself can help ensure money isn’t accidentally left in uninsured accounts.
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