‘Very important for your cash.’ Here’s Which Accounts Are and Are Not Insured by the FDIC

Depositors of the Silicon Valley bank watched this week as their bank’s market value plummeted more than 60%, before it was subsequently shut down by regulators. Meanwhile, regional bank stocks like KeyCorp, Truist Financial, Fifth Third Bancorp and Citizens Financial Group also declined. President Biden assures account holders and business owners in a statement that they were preserved. “All customers holding deposits at these banks can rest assured … they will be safe and they will have access to their money as of today.” But what if your bank closes? are you safe?

By now, it is widely known that the Federal Deposit Insurance Corporation (FDIC) insures many bank accounts with balances of up to $250,000 (full details below). And with the average bank account holding roughly $41,600 according to Bankrate, it’s safe to say that many Americans are covered in the event of a bank failure. “FDIC protection is very important to your cash,” says certified financial planner Nicholas Bunio of Retirement Wealth Advisors, adding that “principal protection is critical to paying your bills. You want to know that you’ll have it when you need it.” You can get this money quickly.

Who is insured by the FDIC?

When it comes to banks insured by the FDIC, depositors with certain types of accounts are covered “dollar for dollar, including principal and any accrued interest, through the date of the closing of the insured bank, up to insurance limits.” Is. FDIC, The FDIC states that “the standard deposit insurance amount for each account ownership category is $250,000 per depositor, per insured bank.”

For example, if a depositor has accounts with an FDIC-insured institution totaling $275,000, and that bank were to go the SVB route, the government would set aside an additional $25,000 of that amount. (Note that deposits at credit unions up to $250,000 are protected by the NCUA (see description) Here,

So what types of accounts are protected? lists accounts as FDIC insurable (it should be stated that banks must fill out the proper application form To become FDIC insured for this protection):

• checking accounts

• Withdrawal Negotiable Order (NOW) Accounts

• savings accounts

• Money Market Deposit Account (MMDA)

• Fixed deposits such as certificates of deposit (CDs)

• cashier’s checks, money orders, and other official items issued by the bank

In addition, there are also coverage known as “ownership categories,” which include some retirement accounts and benefit plans:

• single account

• Some retirement accounts – IRAs, Self-Directed Defined Contribution Plans – Self-Directed 401(k) Plans, Self-Directed SIMPLE IRA Plans are organized as 401(k) plans and Self-Directed Defined Contribution Profit-Sharing Plans Self-directed Keogh plan accounts, and Section 457 deferred compensation plan accounts

• joint accounts

• Revocable Trust Accounts

• irrevocable trust accounts

• employee benefit plan accounts

• Corporation/Partnership/Unincorporated Association Accounts

• government accounts

Who is not insured by the FDIC?

While the FDIC insures to a large extent, there are many investments that are not protected. Here’s who doesn’t have insurance:

• stock investment

• bond investment

• mutual funds

• crypto assets

• life insurance policies

• annuities

• municipal securities

• safe deposit boxes or their contents

• Treasury bills, bonds, or notes that are “backed by the full faith and credit of the U.S. government,” according to the FDIC.

While stocks, bonds, mutual funds, and crypto holdings are (surprisingly) not insured by the FDIC, those held by a broker or custodian are often insured. When it comes to those institutions, Banio says it’s important to make sure there’s some sort of protection for your money.

The Securities Investor Protection Corporation (SIPC), for example, covers a broker in the event of bankruptcy and prevents cash or investments from being lost during bankruptcy proceedings. “But make no mistake, these do not protect against investment losses, but only if the broker fails,” says Bunio. Some personal investments such as real estate and private equity, he says, “may be held in companies not covered by the SIPC.”

Annuities and life insurance, meanwhile, may be covered by state governments. That said, all states are different and cover different boundaries. Some states may cap $300,000 per insurance contract, while others, such as Louisiana and New York, for example, have maximum total benefits for all lines of insurance up to $500,000 per person. According for annuity benefits. For more on this, “it’s important to talk to your carrier and financial advisor,” says Bunio, adding that in all cases, individuals should “choose insurance companies and investment companies that are profitable, and well capitalized. “

stable value funds, such as what’s in your 401(k) Investment And “are usually backed by insurance companies,” Banio says. “These are not FDIC insured but are backed by an insurance company. Again, choose a stable insurance company.”

Can you be overinsured?

“Even though the deposit insurance limit is $250,000, you may be able to protect much more than that without changing banks,” says Greg McBride, senior analyst at Bankrate. For example, a couple is covered by $250,000 each at an FDIC-insured bank, which adds up to a total protection of $500,000.

McBride says the same married couple “could protect $1 million if each was insured for up to $250,000 and had a joint account that insured each account holder for $250,000 for $500,000”. and which were spread “among different banks”.

Some banks also participate in a network known as the Certificate of Deposit Account Registry Service, or CDARSand Incident Command System, or ICS, which effectively expands these insurance coverage limits by spreading liability across multiple banks. While this indeed allows for higher insurance coverage, Bunio says the strategy also does so with “the convenience of dealing with just one bank.”