September Personal Finance Newsletter
September 17, 2010 by Jean Keener, CFP, CRPC, CFDS · Leave a Comment
The September 2010 personal finance newsletter is now available. It includes information on opportunities unique to 2010 for year-end tax planning, tips on teaching your college-age child about money, how a stronger dollar affects your portfolio, information on FDIC insurance now that higher limits are permanent, and a market update. Click here to read the newsletter.
FDIC Insurance
January 8, 2009 by Jean Keener, CFP, CRPC, CFDS · Leave a Comment
What’s protected?
Bank deposits are protected by the Federal Deposit Insurance Corporation (FDIC), an independent agency backed by the full faith and credit of the U.S. government. FDIC insurance covers both demand deposits, such as checking, NOW, savings, and money market deposit accounts, and time deposits, such as certificates of deposit (CDs). It covers both principal and any interest accrued as of the date that an insured bank closes.
FDIC coverage does not include mutual funds, stocks, bonds, life insurance policies, annuities, or other securities, even if they were bought through an FDIC-insured bank. It also does not cover U.S. Treasury securities, though these are backed separately by the full faith and credit of the U.S. Treasury. Finally, the FDIC does not insure safe-deposit boxes, though if a bank were to fail, the FDIC would typically either arrange for transfer to another bank or notify you to retrieve the contents.
How much is insured?
The Emergency Economic Stabilization Act of 2008 temporarily increased the amounts that are FDIC insured at an individual bank or savings and loan. The legislation states that the increase in standard coverage is effective through December 31, 2009, though there has been widespread discussion of making the increased limits permanent.
The previous limit of $100,000 per individual per bank was increased to $250,000. The $250,000 limit applies to single-owner accounts, such as those held in one person’s name, those established for another individual (e.g., an UTMA or escrow account), sole-proprietor (”DBA”) accounts, and accounts established for the estate of a deceased person.
You can’t increase your protection just by opening multiple accounts in your name at the same bank (for example, splitting money between a checking and a savings account, or opening accounts at more than one branch).
What if I have more than $250,000?
The simplest approach is to have accounts at more than one bank. However, your coverage at an individual bank depends on how accounts are owned; different types of accounts are insured separately. You can exceed the $250,000 limit as long as the deposits represent different categories of ownership. For example, a joint account qualifies for up to $250,000 of coverage for each person named as a joint owner. That coverage is in addition to the $250,000 maximum coverage for each person’s aggregated single-owner accounts at that bank. For example, a married couple with three accounts at one bank–they each have $250,000 in an individual account, and they also have $200,000 in a joint account–would qualify for insurance on the entire $700,000.
The limit on the amount protected in one or more retirement accounts at one bank also is $250,000; this is separate from the $250,000 coverage of individual accounts. (Remember, however, that FDIC insurance applies only to deposit accounts, not to any securities held in an IRA or other retirement account.) An online calculator at the FDIC website, www.fdic.gov, can help you estimate the total coverage on your deposit accounts.
Additional safety nets
In some states, a state-chartered savings bank is required to have additional insurance to cover any losses beyond the FDIC limits. Some banks also may participate in the Certificate of Deposit Account Registry Service (CDARS), which enables a bank to spread large CD deposits among multiple banks while keeping the amount at each individual bank within FDIC limits. Paying attention to your bank balances and account ownership can help protect you in a worst case scenario.
FDIC limits changed as of October 3, 2008
November 2, 2008 by Jean Keener, CFP, CRPC, CFDS · Leave a Comment
October 7, 2008
The bail-out bill that passed congress last week included a provision to increase the FDIC coverage limits from $100,000 to $250,000 per individual per bank.
This increase went into effect immediately, but it’s important to note that it’s only valid through the end of 2009. For that reason, if you are keeping deposits in different banks to ensure FDIC coverage, you may not want to consolidate them now because you would likely just need to move everything around again next year.
The Federal Deposit Insurance Corporation (FDIC) is an independent agency of the United States government that protects against the loss of insured deposits if an FDIC-insured bank or savings association fails. FDIC deposit insurance is backed by the full faith and credit of the United States government. Since the FDIC was established, no depositor has ever lost a single penny of FDIC-insured funds.
FDIC insurance covers funds in deposit accounts, including checking and savings accounts, money market deposit accounts and certificates of deposit (CDs). FDIC insurance does not, however, cover other financial products and services that insured banks may offer, such as stocks, bonds, mutual fund shares, life insurance policies, annuities or municipal securities.
There is no need for depositors to apply for FDIC insurance or even to request it. Coverage is automatic.
To ensure funds are fully protected, depositors should understand their deposit insurance coverage limits. The FDIC provides separate insurance coverage for deposits held in different ownership categories such as single accounts, joint accounts, Individual Retirement Accounts (IRAs) and trust accounts.
Basic FDIC Deposit Insurance Coverage Limits*
Single Accounts (owned by one person)
$250,000 per owner**
Joint Accounts (two or more persons) $250,000 per co-owner**
IRAs and certain other retirement accounts $250,000 per owner
Trust Accounts $250,000 per owner per beneficiary subject to specific limitations and requirements**
*These deposit insurance coverage limits refer to the total of all deposits that an accountholder (or accountholders) has at each FDIC-insured bank. The listing above shows only the most common ownership categories that apply to individual and family deposits, and assumes that all FDIC requirements are met.
**The legislation authorizing the increase in deposit insurance coverage limits makes the change effective October 3, 2008, through December 31, 2009.
For more information on FDIC insurance, visit www.fdic.gov.