What Is FDIC Insurance?
Knowing the ins and outs can give peace of mind
What is FDIC
Bank failures—like what just happened with Silicon Valley Bank—can be pretty nerve-wracking, making you worry about losing all your savings overnight. But don’t stress too much, because the Federal Deposit Insurance Corp. (FDIC) has got your back.
The FDIC was set up by Congress back in 1933, after a bunch of bank runs contributed to the Great Depression. Its main job is to protect the money of everyday depositors. By guaranteeing that your money is safe, the FDIC helps prevent the kind of panic withdrawals that can even take down healthy banks.
While the FDIC officially insures up to $250,000 per depositor, there are simple and legal ways to increase that coverage so that all your savings are protected.
So, if the news about Silicon Valley Bank—or Signature Bank, which also recently had issues—has you thinking about pulling your money from your bank, take a deep breath and relax. The answer is probably, “no need.”
Read on to find out how the FDIC works and exactly what is covered.
FDIC Insurance coverage limits
For most deposit accounts like checking and savings, the FDIC insurance limit is $250,000. That’s usually enough for most people, but there are a few things to keep in mind.
The $250,000 limit is per bank, per depositor, and per “ownership category.” Ownership categories include single accounts, joint accounts, certain types of trust accounts, corporate accounts, government accounts, and some retirement and benefit accounts.
This setup means you can actually get more than $250,000 in coverage. For example, if you have $250,000 in a savings account at Bank A and another $250,000 in a savings account at Bank B, you’re covered for $500,000 total. But if you have $500,000 split between a checking and a savings account at one bank, only $250,000 is insured.
You can also boost your coverage limits without using multiple banks. For instance, if you have a savings account in your name and a joint account with your spouse, your family is covered up to $750,000. That’s because the FDIC treats joint accounts as a different ownership category from single accounts, insuring them up to $250,000 per depositor.
Here’s another tip to ensure you’re covered: look beyond your bank’s brand name, especially if you have a high-yield savings account or CD.
Many digital banks are actually brands of traditional banks. For example, BrioDirect is the digital brand of Webster Bank, and UFB Direct is a brand of Axos Bank. These digital banks do carry FDIC insurance, but if you have deposits at both the online brand and the physical parent bank, they might fall under the same $250,000 FDIC coverage limit.
If you’re unsure, you can check the FDIC-member bank for your account using the FDIC’s BankFind tool.
Also, be diligent about FDIC insurance if you keep money with a nonbank fintech company. Many of these neobanks partner with FDIC-member banks for deposit coverage, but the FDIC advises caution. Make sure you understand the terms of how, when, and where your money is insured through the firm’s FDIC-member bank partner.
Keep reading to learn how the FDIC works and what it covers.
What does FDIC insurance cover?
FDIC insurance covers everyday bank accounts like checking and savings accounts, whether they earn interest or not. It also covers other types of deposit products, including money market deposit accounts and CDs.
However, FDIC insurance doesn’t cover everything. It does not protect stocks, bonds (including municipal bonds), mutual funds, life insurance, annuities, or crypto assets, though these might be covered by other types of insurance. It also doesn’t cover U.S. Treasurys, but these are backed by the U.S. government, making them a safe investment.
Here’s a quick rundown:
Are money market accounts FDIC insured?
Yes, FDIC insurance includes money market deposit accounts, but it doesn’t cover money market mutual funds, which you buy through a broker.
Are CDs FDIC insured?
Yes, certificates of deposit (CDs) are FDIC insured, up to the coverage limits. The exception is brokered CDs, which are bought through brokers and aren’t covered by FDIC insurance.
Are credit unions FDIC insured?
No, FDIC insurance doesn’t cover credit unions. Instead, credit union deposits are insured by the National Credit Union Administration (NCUA), which offers the same $250,000 coverage per depositor.
From a customer perspective, NCUA insurance is just like FDIC insurance. If you bank with an NCUA member institution, you automatically get NCUA insurance coverage, just like with FDIC member banks.
Are brokerage accounts FDIC insured?
No, brokerage accounts aren’t covered by FDIC insurance. Investment products like stocks, bonds (including municipal bonds), and mutual funds are not protected. If your brokerage account loses value, that’s a risk you take as an investor.
However, there’s some protection through the Securities Investor Protection Corporation (SIPC), an independent organization for broker-dealers. If your brokerage account is with an SIPC-member company and it fails, SIPC covers lost cash and securities up to $500,000 per customer, per institution, including a $250,000 limit for cash. This limit applies even if you have multiple accounts with the same brokerage.
Are crypto exchange accounts FDIC insured?
No, crypto exchange accounts are not FDIC insured. The FDIC doesn’t cover nonbank assets, including cryptocurrency. It also doesn’t protect against losses from fraud or theft.
The crypto market operates in a regulatory gray area, so you don’t get the same protection as you would with cash in a bank or credit union. Cryptocurrency exchanges, brokers, custodians, and wallet providers are all outside the FDIC’s supervision and coverage.
