The Importance of Deposit Insurance and Understanding Your Coverage (2024)

The Importance of Deposit Insurance and Understanding Your Coverage (1)

Top five things to know

Deposit insurance from the Federal Deposit Insurance Corporation (FDIC) enables consumers to place their money with confidence at FDIC-insured banks and savings associations (insured banks) across the country. FDIC deposit insurance is backed by the full faith and credit of the United States Government.

Here are some key things to know about deposit insurance:

1.What is covered under deposit insurance and how much?

The FDIC protects the money depositors place in insured banks in the unlikely event of an insured-bank failure. Each depositor is insured to at least $250,000 per insured bank.

FDIC deposit insurance covers all types of deposits held at an insured bank. This includes deposits in a checking account, negotiable order of withdrawal (NOW) account, savings account, money market deposit account (MMDA), certificate of deposit (CD) or other time deposit account, as well as official items issued by an insured bank such as a cashier's check or money order. FDIC insurance covers depositors' accounts at each insured bank, dollar-for-dollar, including principal and any accrued interest through the date of the insured bank's failure, up to the insurance limit.

FDIC deposit insurance covers various types of banking products, including:

FDIC deposit insurance covers:
Checking accounts
Negotiable Order of Withdrawal (NOW) accounts
Savings accounts
Money Market Deposit Accounts (MMDAs)
Certificates of Deposit (CDs)
Cashier’s checks
Money orders
Other official items issued by an insured bank

2.What is NOT covered?

The FDIC does not insure money invested in stocks, bonds, mutual funds, life insurance policies, annuities or municipal securities, even if these investments are purchased at an insured bank.

FDIC deposit insurance does not cover:
Stock investments
Bond investments
Mutual funds
Life insurance policies
Annuities
Municipal securities
Safe deposit boxes or their contents
U.S. Treasury bills, bonds, or notes
Crypto assets

You should understand the terms and conditions of financial products offered by non-bank companies and how your funds may, or may not, be protected. It is important to be aware that non-bank companies are never FDIC insured. Even if they partner with insured banks, money you send to a non-bank company is not FDIC insured unless, and until, the company deposits it in an insured bank.

FDIC insurance protects you only in the unlikely event the insured bank fails, and does not protect you against losses due to the non-bank company’s bankruptcy or failure to meet its obligations to its customers. A non-bank’s company failure or bankruptcy may result in delays in accessing your money, even when your money was deposited in a bank for your benefit.

3.How to calculate your coverage? EDIE!

FDIC Electronic Deposit Insurance Estimator (EDIE) is an online tool that can be used to determine whether your accounts are fully insured at each insured bank where your deposits are held. EDIE allows you to input dollar amounts you have on deposit in an insured bank or use a hypothetical scenario to determine your coverage.

FDIC does NOT insure non-deposit investment products, such as stocks, bonds, government and municipal securities, mutual funds, annuities (fixed and variable), life insurance policies (whole and variable), savings bonds, crypto assets, etc. EDIE is NOT an estimator for investments (even if the investments were purchased from an insured bank).

4.When and how is deposit insurance paid?

Deposit insurance is paid when an insured bank fails. When this happens, the bank’s chartering authority typically steps in to close the bank and brings in the FDIC as the deposit insurer. FDIC staff is on location the day it fails, working to identify those who have insured money in the bank. In many instances, another bank agrees to buy the failing bank and the transition is smooth for depositors. If there is no immediate buyer, the FDIC maintains access for depositors to their insured deposits.

For more information, go to: When a Bank Fails - Facts for Depositors, Creditors, and Borrowers.

5.I have additional questions about deposit insurance, who can I contact?

The FDIC website has a page of frequently asked questions (FAQs) about deposit insurance. You can also write and receive a response from the FDIC by visiting the FDIC Information and Support Center. If you wish to speak to a deposit insurance specialist, you may call: 1-877-ASK-FDIC (1-877-275-3342).

FDIC is an independent agency of the United States Government that protects you against the loss of your insured deposits if an insured bank fails. FDIC insurance is backed by the full faith and credit of the United States Government. Since the start of FDIC insurance in 1934, no depositor has lost a single cent of insured deposit.

Additional resources

Fact Sheet: What the Public Needs to Know AboutFDIC Deposit Insurance and Crypto Companies

Understanding Deposit Insurance

FDIC BankFind

Are My Deposits Insured by the FDIC?

Deposit Insurance Videos

La Calculadora EDIE

FDIC Consumer News: Is the Money on My Prepaid Card FDIC-Insured?

FDIC Consumer News: Avoiding Scams and Scammers

FDIC Consumer News: How Does the FDIC Protect Consumers?


For more consumer resources, visitFDIC.gov, or go to the FDIC Knowledge Center. You can also call the FDIC toll-free at 1-877-ASK-FDIC (1-877-275-3342). Please send your story ideas or comments toConsumerNews@fdic.gov.


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The Importance of Deposit Insurance and Understanding Your Coverage (2024)

FAQs

The Importance of Deposit Insurance and Understanding Your Coverage? ›

Bottom Line. In the event of a bank failure, FDIC insurance provides crucial protection for consumers' deposits. With up to $250,000 in coverage per depositor, per FDIC-insured bank, per ownership category, it's important for individuals and businesses to understand the limits and guidelines of this insurance.

What is the importance of deposit insurance? ›

It assures small depositors that their deposits are safe, and that their deposits will be immediately available to them if their bank fails. It maintains public confidence in the banking system, thus fostering economic stability.

Why is deposit protection important? ›

The role of deposit insurance is to stabilize the financial system in the event of bank failures by assuring depositors they will have immediate access to their insured funds even if their bank fails, thereby reducing their incentive to make a "run" on the bank.

What is the most important feature of deposit insurance? ›

In case of a bank failure, the Deposit Insurance System guarantees the reimbursement of up to maximum amount per depositor, regardless of the number and type of deposits held in such a bank and within the specified time period.

What is the purpose of deposit policy? ›

First, deposit insurance protects individual depositors against the consequences associated with the failure of an insured institution. Second, the provision of deposit insurance relieves insured depositors of the difficult and complex task of monitoring and assessing the condition of their financial institution.

What is the meaning of deposit insurance? ›

Deposit insurance or deposit protection is a measure implemented in many countries to protect bank depositors, in full or in part, from losses caused by a bank's inability to pay its debts when due. Deposit insurance systems are one component of a financial system safety net that promotes financial stability.

Is deposit insurance effective? ›

FDIC deposit insurance protects your money in deposit accounts at FDIC-insured banks in the event of a bank failure. Since the FDIC was founded in 1933, no depositor has lost a penny of FDIC-insured funds.

What is risk of deposit insurance? ›

Risk-based deposit insurance is insurance with premiums that reflect how prudently banks act when investing their customers' deposits. The idea is that flat-rate deposit insurance shelters banks from their true level of risk-taking and encourages poor decision-making and moral hazard.

What is one drawback of deposit insurance? ›

While deposit insurance can, in theory, make the banking system more stable by reducing liquidity risk, it has also been shown to increase the risk appetite of banks and undermine financial stability in the long run.

What is the deposit insurance limit? ›

If your federally insured bank fails, Federal Deposit Insurance Corp. insurance keeps your money safe. The FDIC insures up to $250,000 per depositor, per institution and per ownership category. FDIC insurance covers deposit accounts and other official items such as cashier's checks and money orders.

What are three things not insured by FDIC? ›

The FDIC does not insure:
  • Stock Investments.
  • Bond Investments.
  • Mutual Funds.
  • Crypto Assets.
  • Life Insurance Policies.
  • Annuities.
  • Municipal Securities.
  • Safe Deposit Boxes or their contents.
Apr 1, 2024

Which bank is not FDIC insured? ›

It is rare for a bank not to have FDIC insurance, but there are exceptions. Bank of North Dakota, for example, is not FDIC-insured. Instead, it is backed by the full faith and credit of the State of North Dakota.

Why is deposit important for commercial banks? ›

Commercial banks make money by providing and earning interest from loans such as mortgages, auto loans, business loans, and personal loans. Customer deposits provide banks with the capital to make these loans.

What is deposit insurance and up to what amount does it protect you? ›

If your federally insured bank fails, Federal Deposit Insurance Corp. insurance keeps your money safe. The FDIC insures up to $250,000 per depositor, per institution and per ownership category. FDIC insurance covers deposit accounts and other official items such as cashier's checks and money orders.

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