Protecting Your Money – FDIC and NCUA Insurance
When holding your money in a checking, savings, or money market account, as well as a certificate of deposit, your deposits are insured up to $250,000 by either the Federal deposit Insurance Company (FDIC) or the National Credit Union Administration (NCUA). (It is important to understand however that FDIC insurance does not apply to other types of investment products such as annuities, stocks, bonds, mutual funds etc even if those products are offered by a bank).
What if you have several accounts with a bank?
The $250,000 applies to the combined total of the deposits you have at a specific bank. Add up all the deposits that you have with a bank between CDs, Savings Accounts, and Money Market accounts. If the number exceeds $250,000, the additional money may not be covered by the FDIC.
What if you have joint accounts?
Joint accounts are covered up to $250,000 per account holder. If you and your wife have a joint account for example, the coverage is up to $500,000. It is important to understand however that any money held at the same bank in accounts outside of the joint account, is included in the $250,000 per person limit.
What if you have business account?
Business bank accounts for partnerships, Limited Liability Corporations (LLCs), and corporations enjoy $250,000 in protection as well. This is separate from any insurance provided on a personal accounts.
What should you do if your have more that $250,000 at a single bank?
To maximize your FDIC or NCUA deposit insurance coverage, you would open accounts with multiple banks, and limit the total funds held with any single bank to under $250,000.
What is the difference between the FDIC and NCUA?
The FDIC is in charge of insuring bank deposits, and the NCUA is in charge of insuring credit union deposits. As most people hold their money in FDIC insured banks, rather than credit unions, that is where our focus will be. If you happen to hold your account at a credit union, the two agencies are very similar, so the same general terms should apply.
According to the FDIC.gov website:
“The Federal Deposit Insurance Corporation (FDIC) is an independent agency of the United States government that protects the funds depositors place in banks and savings associations. FDIC insurance is backed by the full faith and credit of the United States government. Since the FDIC was established in 1933, no depositor has ever lost a single penny of FDIC-insured funds.”
As a result of the financial crisis in 2008 the FDIC raised its insurance coverage from the previous level of $100,000, to $250,000 limit that exists today. Originally this increase was supposed to expire at the end of 2013 however on July 21st 2010, president Obama permanently raised the limit. The now permanent FDIC insurance of up to $250,000, applies per depositor, per FDIC insured bank, per account category. To most people this means that money held at a bank is insured up to $250,000 for a single account, and $250,000 per owner if the account is a joint account.