FDIC Insurance: How Your Bank Deposits Are Protected
If your bank fails, the FDIC covers your deposits up to $250K per account ownership category. Silicon Valley Bank depositors were fully covered despite having over $250K. Here's how FDIC insurance works and how to maximize your coverage.
The Federal Deposit Insurance Corporation (FDIC) is an independent agency created by Congress in 1933 after thousands of bank runs caused widespread failures during the Great Depression. It insures deposits at member banks, giving consumers confidence that their money is safe even if the bank fails. The last bank failures affecting depositors were in 2023 — Silicon Valley Bank, Signature Bank, and First Republic.
Real-world example: A family of 4 has $2 million in cash from a home sale. To insure it all at one bank: Single account: $250K (husband). Joint account: $500K (husband + wife). Trust account with 3 beneficiaries (2 children + spouse): $750K ($250K per beneficiary x 3). IRA: $250K (husband's rollover IRA). Corporate account (LLC): $250K. Total: $2M fully insured at one bank. Alternatively, split across 4 banks with $250K single at each for $1M.
What FDIC Coverage Means
Coverage is $250,000 per depositor, per insured bank, per ownership category. This means you can have more than $250K insured at one bank by using different account categories. The FDIC does not insure your money at each branch of the same bank — it is per bank, per ownership category. If you have accounts at different banks, each bank provides separate $250K coverage.
Ownership Categories
- Single accounts ($250K) — One owner. This covers individual checking, savings, and money market accounts.
- Joint accounts ($250K per co-owner) — A couple with a joint account gets $500K total coverage ($250K each).
- Revocable trust accounts ($250K per beneficiary) — Accounts with multiple beneficiaries can get $1M or more.
- Irrevocable trust accounts — Qualified trust accounts get $250K per beneficiary.
- Retirement accounts (IRAs) — $250K separate from other categories.
- Corporation/partnership/LLC accounts — $250K per entity.
- Government accounts — $250K.
What Is and Is Not Covered
FDIC insurance covers checking accounts, savings accounts, money market deposit accounts, and CDs (certificates of deposit). It does NOT cover stocks, bonds, mutual funds, ETFs, crypto, annuities, life insurance, safe deposit box contents, or Treasury bills (though Treasuries are backed by the US government separately). Credit unions have equivalent coverage through the NCUA (National Credit Union Administration) — also $250K per ownership category. High-yield savings accounts are FDIC-insured as long as the bank is a member.
The SVB Failure and Systemic Risk Exception
In 2023, when Silicon Valley Bank failed, the FDIC invoked the "systemic risk exception" to cover all deposits, including those over $250K. This was an exception, not standard policy. Under normal circumstances, deposits exceeding $250K at a failed bank may not be fully recovered. Understanding the standard limit helps you plan appropriately and avoid relying on emergency exceptions. Choosing the right account types can help maximize your coverage.
What happens if my bank fails?
The FDIC typically steps in within days. It either transfers your accounts to another healthy bank or issues you a check for your insured deposits up to $250,000 per ownership category. For uninsured amounts (over $250K), you may receive a receivership certificate and eventual partial recovery from the sale of the bank's assets. Historically, recovery on uninsured deposits has been 50% to 90%, but it varies and can take years. Building a solid financial foundation includes understanding these protections.
How much FDIC insurance do I have?
You can calculate your coverage using the FDIC's Electronic Deposit Insurance Estimator (EDIE). The default coverage is $250,000 per depositor, per bank, per ownership category. If you have a single account and a joint account at the same bank, the joint account is treated as a separate ownership category. Review your accounts annually or when you open new accounts to ensure your coverage matches your needs.
Are joint accounts insured separately from individual accounts?
Yes. A joint account is a separate ownership category from a single account. For a two-person joint account, each co-owner is insured up to $250,000 for their share of the joint account. This means a married couple could have $250K in individual accounts each and up to $500K in a joint account — all insured at the same bank. CDs and money market accounts are also covered under these same categories.
Can I have more than $250K insured at one bank?
Yes, by using multiple ownership categories. A single person could have: $250K in an individual account, $250K in an IRA, $250K as beneficiary of a revocable trust account, $250K in an LLC account — totaling $1M at one bank. A couple with children can easily achieve $2M or more using joint accounts, trust accounts with multiple beneficiaries, IRAs, and business accounts. The key is structuring accounts across different ownership categories rather than just opening multiple accounts in the same category.
Related Resources
Personal Finance for Beginners
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CD Ladder and Money Market Guide
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