 Oppenheimer & Co. analyst Meredith Whitney stated during a recent interview on CNBC that there are roughly $2.5 trillion of uninsured bank deposits in the United States. And if you’ve been following the news lately, you may have heard about the failure of IndyMac Bank, which according to the Wall Street Journal is the “the third-largest bank failure in U.S. history”.
The failure of this bank caught a number of its customers off guard, creating panic and generating a great deal of anxiety. While most were covered by FDIC insurance, some customers had more money deposited than is legally covered by FDIC, and thus may not get back the full amount of their deposits.
As the FDIC's own website states:
So - you feel your cash is safe and protected when you walk through the door of the bank or saving association, much safer than when you kept it under your mattress. And you should. BUT, are your funds all covered by FDIC insurance just because you walked into a secure-looking building with iron bars and guards? Not necessarily - it depends on which of the bank's products you decide to use and whether the bank is FDIC insured. And, as should be noted, it also matters how much money you have in an FDIC-insured bank (there are limits to the amount of money that is covered by the FDIC for any single institution).
So in light of the IndyMac Bank failure and the many news stories and discussions surrounding the banking system here in the U.S. recently, we thought it would be worthwhile to do a quick overview of FDIC insurance and how you can make sure that you’re protected. We put together a very simple 2-step guide to making sure your bank deposits are indeed FDIC insured.
Step 1:
To find out if your bank is an FDIC-insured institution, visit the FDIC's new Bank Find tool.
Once you find your bank, you can click on its name to see if it is FDIC-insured (it will say something like “[your bank name] (FDIC Cert: [certification number]) is a FDIC Savings Bank and has been FDIC insured since [date]”. Assuming it is FDIC insured, you can move to step two. If not, you might want to consider moving your money into an FDIC-insured institution.
Step 2:
Next, make sure that you understand what is and is not covered by FDIC insurance. According to the FDIC website:
You are probably familiar with the traditional types of bank accounts - checking, savings, trust, certificates of deposit (CDs), and IRA retirement accounts - that are insured by the FDIC. Banks also may offer what is called a money market deposit account, which earns interest at a rate set by the bank and usually limits the customer to a certain number of transactions within a stated time period. All of these types of accounts generally are insured by the FDIC up to the legal limit of $100,000 and sometimes even more for special kinds of accounts or ownership categories. Note that FDIC insurance only covers up to $100,000 per depositor (couples with joint accounts are insured up to $200,000). The FDIC explains:
The basic insurance amount is $100,000 per depositor per insured bank. Certain retirement accounts, such as Individual Retirement Accounts, are insured up to $250,000 per depositor per insured bank.If you and your family have $100,000 or less in all of your deposit accounts at the same insured bank, you do not need to worry about your insurance coverage -- your deposits are fully insured.
If a couple has a joint checking account and a joint savings account at the same insured bank, each co-owner's shares of the two accounts are added together and insured up to $100,000, providing up to $200,000 in coverage for the couple's joint accounts. What is not insured by the FDIC? The FDIC website states:
Increasingly, institutions are also offering consumers a broad array of investment products that are not deposits, such as mutual funds, annuities, life insurance policies, stocks and bonds. Unlike the traditional checking or savings account, however, these non-deposit investment products are not insured by the FDIC. The FDIC also provides a brief outline as a reference guide to what is and isn’t covered by FDIC insurance:
FDIC-Insured
Checking Accounts (including money market deposit accounts)
Savings Accounts (including passbook accounts)
Certificates of Deposit
Not FDIC-Insured
Investments in mutual funds (stock, bond or money market mutual funds), whether purchased from a bank, brokerage or dealer
Annuities (underwritten by insurance companies, but sold at some banks)
Stocks, bonds, Treasury securities or other investment products, whether purchased through a bank or a broker/dealer
Useful Links
There is a lot more information on the FDIC website that is worth reading, and we suggest you take a few minutes to read through it all to make sure your money is safe and to give you peace of mind. We’ve provided a list of links below to important topics found on the FDIC website. If you have any questions, contact the FDIC, your bank, or your financial planner.
Website Homepage
Bank Find tool
Insured or Not Insured?
Deposit Limits
Frequently Asked Questions for Deposit Insurance
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