FDIC insurance coverage generally guarantees up to $100,000 per person per institution.
Note: FDIC coverage was temporarily increased in October 2008. This page assumes that the limits are the same as they were before the temporary increase.
Multiple Accounts Under FDIC Coverage Limits
Spreading your accounts out at multiple institutions is one way to stay under FDIC coverage limits. What can you do if you have $500,000 of savings and you’re a single person? You can use 5 different institutions - although you should use 6 - and take advantage of each institution’s $100,000 worth of FDIC coverage.
FDIC Coverage and Interest
In the example above, you should use more than 5 banks because you’ll earn interest on your deposits. If you make a deposit equal to the FDIC coverage limit, every penny of interest you earn will be at risk. It’s best to leave some room in the accounts so you don’t have to transfer interest payments out.
Titling Accounts
Another way to manage FDIC coverage is to properly title your accounts for maximum coverage. If have $200,000, you’d take a risk by leaving it in one bank. However, if you have a joint account holder with the same rights to that money as you, FDIC coverage would be $200,000 because there are two people on the account.
By adding different categories of account ownership, you add to the available FDIC coverage. For example, some trust accounts count as special categories, and retirement accounts are a separate category.
FDIC Coverage With Service Providers
If you’re not willing to manage your FDIC coverage yourself, you can have somebody do it for you. Financial advisors and brokers can buy brokered CDs from a variety of FDIC insured institutions, keeping your assets under coverage limits. You can also use the CDARS network to have a bank provide a similar service.
Mergers and FDIC Coverage
If you’ve been doing things yourself, you should watch for bank mergers and rescues. What happens if you hold accounts at Bank A and Bank B, and the two banks merge? If there is a bank failure handled by the FDIC, insurance coverage will often treat your deposits as if they were at separate institutions for a short period. After that period, you may want to move assets elsewhere to stay under FDIC coverage limits.
The Details on FDIC Coverage
Taking advantage of FDIC coverage is essential. You should do some homework if you potentially have money at risk. The FDIC website is very helpful, and they have examples and a handy calculator that helps you determine your risk. They even have real people who will explain FDIC coverage to you so that you don’t have to guess.
