Just a couple of months ago, the failures of Silicon Valley Bank and Signature Bank shook the financial industry and its consumers, and now, First Republic Bank has closed its doors as well. This has likely left you wondering: Is my money safe? Should I be prepared for more bank failures?
While some experts predict ongoing failures, there’s no way to know what the future holds. However, we can be sure that the Federal Deposit Insurance Corporation (FDIC) will keep certain funds protected.
Read on to learn more about FDIC insurance and how it applies to you.
What Is the FDIC?
The Federal Deposit Insurance Corporation, or FDIC, is a United States government agency responsible for overseeing the sound operation of banks nationwide. Its primary duty, however, is insuring deposits at member banks in the case of bank failure. The organization protects your money through FDIC insurance, which insures your accounts at member banks up to $250,000 per depositor, account type, and banking institution. In other words, if a bank fails, you will not lose any money up to the deposit insurance limit.
During times of turmoil, individuals with the peace of mind that their FDIC insurance is fully backed by the faith and credit of the United States government. If any money is lost during bank failure, up to the depositor limit, the government has promised to pay all of the money back as quickly as possible. In fact, according to the FDIC, no depositor has ever lost any amount of their FDIC-insured deposits.
What accounts qualify?
FDIC insurance is a valuable safety net for all consumers, but it won’t cover all bank accounts. To safeguard your hard-earned money, you need to know which accounts qualify for insurance. These accounts include:
- Checking accounts
- Savings accounts
- Certificate of deposit (CD) accounts
The FDIC also insures money market deposit accounts (not to be confused with money market mutual funds). For a complete list of insured accounts, visit the FDIC website.
Which accounts don’t qualify?
The FDIC does not insure non-deposit investment products like stocks, bonds, mutual funds, annuities, cryptocurrencies, and life insurance policies. U.S. Treasury bills are also not guaranteed by the FDIC. Instead, they’re fully backed by the United States government itself.
Furthermore, the FDIC only covers bank deposits. The National Credit Union Administration (NCUA) protects deposits in credit unions up to $250,000.
What Else Do You Need to Know?
Here, we go over some of the top questions regarding FDIC insurance.
What happens when a bank fails?
When a bank fails, the FDIC responds in two ways. First, the FDIC pays insurance to depositors as fast as possible, sometimes within just one day. The FDIC provides the depositor with a new account at a separate bank or a check with the insured balance. In addition to insuring bank deposits, the FDIC will also assume the failed bank to collect its assets and settle its debts.
How can I receive coverage?
If you open a qualifying account at an FDIC-insured bank, you automatically receive deposit insurance up to $250,000 per bank, per account category. There are no steps you need to take to register for coverage.
Which financial institutions are insured?
Since the FDIC was established in 1933, all member banks of the Federal Reserve System must insure deposits with the FDIC. For detailed information on a specific bank, you can use the FDIC’s BankFind tool.
What happens to funds above $250,000?
If your account balance exceeds the insurance limit, the FDIC won’t insure the remaining funds. However, because the FDIC insures $250,000 per depositor for each ownership category, you can potentially optimize your coverage by splitting funds among various ownership categories.
With the looming threat of more bank failures, we know you likely have specific questions about how to protect your assets. We’re here to give you the answers you need with our comprehensive financial planning services. Reach out today to learn more.
