You really shouldn’t sweat a bank failure. Not only is it uncommon, but if it does happen, the Federal Deposit Insurance Corporation (FDIC) insures balances up to $250,000 per depositor, per bank and per ownership category. If the above FDIC insurance limit seems low compared to what you have in the bank, there are some smart ways to get more coverage.
When a bank is unable to meet its obligations to account owners, it fails. If the bank is a “Member FDIC” (most are), the FDIC steps in and either moves the bank’s assets to a healthy institution or pays back the insured deposits to the bank’s customers. That’s how FDIC insurance works. To find out whether your bank is covered, use the FDIC’s BankFind Suite tool.
But there are limits to what the FDIC will cover on your deposits. The FDIC insurance limit is up to $250,000 per depositor (you), per FDIC-insured bank (your bank) and per ownership category (how the account is owned). An ownership category is how you store your money at the bank, or rather, the type of legal ownership you have over the account.
|Ownership category||Definition||Coverage limit|
|Single accounts||An account owned by a single person||$250,000 per owner|
|Joint accounts||An account owned by two or more people||$250,000 per co-owner|
|Certain retirement accounts||Long-term, often tax-advantaged savings accounts||$250,000 per owner|
|Business accounts||A deposit account for business funds||$250,000 per corporation, partnership or unincorporated association|
|Government accounts||Accounts owned by the U.S., any state government, county, municipality, etc.||$250,000 per official custodian (the person safeguarding the account)|
|Revocable trust accounts*||An account associated with a trust that determines how your assets are to be handled after you pass||$250,000 per owner, per unique beneficiary|
|Irrevocable trust accounts*||An account associated with a nonchangeable trust that determines how your assets are to be handled after you pass||$250,000 for the noncontingent interest of each unique beneficiary|
|Employee benefit plan accounts||Account associated with an employer-sponsored retirement plan||$250,000 per plan participant|
*A new, simpler rule will go into effect in April 2024 regarding coverage for revocable and irrevocable trust accounts. A deposit account owner’s trust deposits — revocable and irrevocable — will be insured for up to $250,000 for each beneficiary (up to five). This is regardless of contingencies.
Tip: The FDIC does not cover investments, such as bonds, stocks, mutual funds or cryptocurrency. However, the Securities Investment Protection Corporation (SIPC) insures your investments in the event of a brokerage firm failure.
To put it in perspective, here are a few examples of how coverage can work across different types of legal ownership.
At the same bank, you have $250,000 in your personal account and your spouse has $250,000 in their personal account. Because each account has a single owner, they’re both fully insured. Your combined coverage equals $500,000.
You and your spouse have a joint CD with a balance of $350,000. You both also have a joint savings account with a balance of $150,000 at the same insured bank. Because each co-owner is insured for up to $250,000, your combined FDIC insured amount would be $500,000, protecting the funds across both joint accounts.
You alone own a revocable trust account with the maximum amount of beneficiaries (five). Because each unique beneficiary receives coverage for $250,000, your trust account would be insured for a total of $1,250,000.
Tip: Use the FDIC’s electronic deposit insurance estimator (EDIE) to calculate the coverage you’ll receive at a specific bank.
To maximize the amount of coverage for your funds over the $250,000 threshold, here are some things you can do.
The FDIC insurance limit for 2022 is up to $250,000 per depositor (you), per FDIC-insured bank (your bank) and per ownership category (type of legal ownership over the account). This limit has remained the same since 2010.
A few ways to increase your FDIC insurance coverage: open a single account at more than one bank, open a joint account, open a certain retirement account or add beneficiaries to a revocable trust account.
If your bank fails, the FDIC steps in and moves the bank’s assets to an operational bank or pays you directly for your insured deposits. Either way, your money is insured for up to $250,000 per ownership category.
Yes. Because the FDIC insures a joint account for $250,000 per co-owner of the account, it’s covered for a total of $500,000 if it has two co-owners.
Yes, FDIC insurance can span many accounts. That’s because your coverage is restricted to $250,000 per ownership category, per bank — there’s no limit to the number of accounts. Let’s say you have five single accounts at one bank — they’re all covered, up to $250,000 total.
Investments like bonds, stocks, mutual funds, life insurance policies, municipal securities, safe deposit boxes and U.S. Treasury bills are not insured by the FDIC.