FDIC Insurance Limits Coverage

Update: Due to the economic recession, Congress increased FDIC insurance limits to $250,000 from $100,000. Everything below still applies, except for the higher numbers.

If you have paid any attention to the signs in your bank, chances are you have seen one telling you that your deposits are insured up to $100,000 by the FDIC, or Federal Deposit Insurance Corporation. But, what is FDIC insurance, exactly, and how are your FDIC savings actually insured?

Understanding FDIC Insurance

Banks that are members of FDIC have their deposits insured in case of a bank failure. FDIC banks boast of this insurance coverage to assure customers of thier money's safety. However, FDIC coverage can be kind of tricky depending upon the person.

First, understand that if you do not have at least $100,000 deposted in a BANK, you have nothing to worry about and you are fully covered and there is no need for you to try and understand how FDIC insurance works. (Money in an investment account, or 401k, or brokerage account, is different.)

If you do have more than $100,000 in bank deposits, then the most important thing to understand about FDIC insurance is that it is applied based on account title.

Account title means how the account it legally named. That is, whose name is on the account, and how is that structured.

There are two basic account titles, joint and individual. If you have an account with your spouse, that is a joint account. If you have a spouse, but they are not "on your account" then that is an individual account. (There are many other types of account titles including trusts, and the various ways of structuring accounts for minors. The same rules apply to these accounts.)

Each differently titled account is insured for the full FDIC insurance amount. In other words, a joint account is insured for $100,000 and a an individual account is also insured for $100,000, making a total FDIC savings deposit insurance limit of $200,000 in this situation.

It is very easy for a married couple to get $300,000 worth FDIC insurance on their accounts. By having a joint account, and each having an individual account, that makes 3 differently titled accounts. Each account gets the full amount of FDIC coverage.

What is important is to not have more than $100,000 in a single account. The same married couple could have much less coverage if they had $200,000 in the joint account and $50,000 in each individual account. In this case, only $200,000 of their $300,000 in deposits would be insured because the joint account will be limited to just $100,000 of insurance.

Keep an eye on your accounts and divide them properly to maintain the maximum coverage.

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