Protecting Your Money

In the wake of turbulence in the financial markets, it’s worth reviewing the legal protections available for assets held by banks, credit unions, and securities dealers.

Deposit Accounts

Generally, deposit accounts at banks and savings and loans insured by the Federal Deposit Insurance Corporation (FDIC) are insured up to $250,000 per depositor per bank. FDIC insurance covers both demand deposits (those that provide immediate access to cash, such as checking, NOW, and savings accounts as well as 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 insurance does not cover 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 (because they are backed separately by the full faith and credit of the federal government) or safe deposit boxes.

You can’t increase your protection simply by opening more than one account in your name at the same bank. For example, splitting the money between a checking and a savings account or opening accounts at different branches of the same bank do not increase your coverage.

However, deposits that represent different categories of ownership may be independently insured. 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 FDIC 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.) 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, including the original bank, within FDIC insurance limits.

You do not have to be a U.S. citizen or resident for your account to receive FDIC protection. According to the FDIC, no depositor has ever lost a penny of funds that were covered by FDIC insurance. An online calculator at the FDIC’s website, www.fdic.gov, can help you estimate the total FDIC coverage on your deposit accounts.