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FDIC insurance inspires banking confidence


A majority of consumers believe banks do a good job protecting their money. They get an added layer of security because the government insures deposits through the Federal Deposit Insurance Corporation.

President Franklin D. Roosevelt and Congress created the FDIC in 1933 in the midst of the Great Depression to bring stability and soundness to banking.

But there are misconceptions about how the FDIC works, what it will cover and how much. Let’s clear them up.

There is no need to apply for FDIC insurance. You’re automatically covered once you deposit funds in an FDIC- insured bank, but there are limits.

The type of deposit account you have, such as a checking account or certificate of deposit, isn’t what counts. It’s the total money you have in each “ownership category” – single accounts, joint accounts, revocable trusts, etc. The FDIC insures up to $250,000 per person per ownership category. So if Sarah and Joe own a joint checking account with $500,000 in it, each would be insured for $250,000.

Having multiple joint checking accounts won’t increase your FDIC insurance. You can, however, increase your coverage by splitting your money between different categories at the same bank or by adding “payable on death” status to your accounts and designating beneficiaries.

For example, Sarah and Joe have single accounts in their name and each receive up to $250,000 in coverage. They also have a $500,000 joint account, and because it’s a separate category from a single-name account, they each gain another $250,000 of insured coverage. They also have their own IRAs, and they are each fully insured up to $250,000 because those accounts are in a separate ownership category, “certain retirement accounts.” This category also includes Simplified Employee Pension (SEP) IRAs and self-directed 401(k) and Keogh plan accounts.

Joe also has a $750,000 revocable trust that names Sarah and their two kids as beneficiaries. Because revocable trusts are a separate category and the FDIC insures each beneficiary in this category up to $250,000, the entire amount is insured assuming each beneficiary has an equal interest.

The benefit of having categories is you can split your assets between them and potentially be fully FDIC insured without having to spread your money across multiple banks. However, if you prefer to have your money in one category and it exceeds the FDIC insurance limit, our bank offers a unique service called Certificate of Deposit Account Registry Service (CDARS). Your funds can be spread among our CDARS member banks, so if you have $2 million, for example, your money is placed among eight or more CDs so it stays within the $250,000 insurance limit. The benefit is you get one statement, one interest rate and you can access your entire investment through our bank. Visit our website to see a video of how CDARS works. Both individuals and businesses can take advantage of CDARS.

There are a few things the FDIC doesn’t insure, including investments, safe deposit box contents and loss from robbery or theft.

If you’d like to learn more about the FDIC categories and how they work, visit their website, or talk to your banker at 888-474-7275 to see how your unique situation fits within the FDIC guidelines. You can also use the FDIC’s calculator; to see how your funds are insured. Protecting what you’ve worked a lifetime for and your peace of mind are always our top priorities.


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