What is FDIC (Federal Deposit Insurance Corporation) and FDIC Insured?

 

I’ve heard in some bank commercials that the account is FDIC insured. What does it mean?

FDIC stands for Federal Deposit Insurance Corporation. It is a federal agency that insures deposits in participating US banks, which protects the depositors if the bank goes bankrupt. It was formed as a result of the great depression, to boost depositor confidence.

Is there any limit to FDIC insurance?

Yes, the current limit is $250,000 per person.

Is this limit per person or per bank? When I have a million dollars, can I put it evenly in 4 different banks and be fully FDIC insured?

Very intelligent question Sooper Cooper! This limit is per person per bank, so yes, you will be FDIC insured for up to $250,000 in each bank you have an account in.

Is there any additional cost for FDIC insurance?

That’s the best part – banks have to pay a premium to FDIC for this protection, but it’s absolutely free for you.

What is not covered by FDIC insurance?

Most banks offer FDIC insured checking and savings accounts, as well as Certificate of Deposits and money market accounts. However, FDIC insurance only covers you against bank failure. It does not protect you against fraud or theft.

Stocks, bonds and mutual fund accounts are not covered by FDIC insurance. Accounts in credit unions are also not protected by FDIC – although they are protected through something called National Credit Union Share Insurance Fund – but that’s a topic for another time.

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