The Federal Deposit Insurance Corporation, or FDIC, has been around since 1933. This independent government corporation of the United States was set up to protect the safety of all deposits made in a FDIC institution up to $250,000. It was set up after the Great Depression to build up consumer confidence after the banking failure of that time. Originally started by Franklin D. Roosevelt, the coverage has increased over the years from $3,400. FDIC insured institutions are required to post a sign saying that their deposits are backed by the United States Government. Since the start of the FDIC insurance, no depositor has lost any of their insured deposits.
You do not need to sign up for or request the FDIC insurance. At establishments where it exists, it comes automatically for a number of accounts, including checking and savings, money market deposit accounts, CDs and IRA accounts.
What if You Have Multiple Accounts?
If you have several accounts at one bank, you may be eligible for the coverage of up to $250,000 for more than one account. This is possible if for example you own one checking account by yourself, but have a joint IRA account with a spouse or someone else. Both these accounts would then be eligible for the insurance separately. Some examples of individual accounts are estate accounts, single ownership accounts and sole proprietorship accounts. On the other hand, if you own both of these accounts as a single owner, you would receive the $250,000 worth of coverage combined and spread over both of these accounts. Examples of joint ownership accounts are the various types of IRA accounts available such as traditional IRAs and Roth IRAs.
FDIC Business Account Protection
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Keep in mind as well that although business accounts receive the $250,000 worth of coverage, this is not so for sole proprietorships. With these accounts, they are treated like an individually owned account, so that if this is one of two or more individual accounts that you own, the $250,000 coverage will be spread over all your accounts.
Banks also insure In Trust For, or ITF accounts. These accounts are usually linked to a specific beneficiary, such as a person, a non-profit organization or charity. Upon death of the owner, the funds go to the beneficiary of the account. These accounts can be more complicated than traditional ones, and it is best to contact the FDIC first to fully understand them if you are interested in opening one.
What Isn't Protected?
Accounts that are not insured by this insurance are accounts such as mutual funds, (whether they are stock, bond or money market mutual funds), annuities, stocks, bonds and any other kind of investment accounts.
Although all types of accounts are not insured by the FDIC insurance, your general accounts such as checking and savings are, which means you can feel safe banking at any FDIC institution. With a bit of research as well, it is easy to understand which accounts are covered by this insurance and which ones are not. This way you can be fully aware and prepared about the safety of the different types of accounts you hold.