Key Takeaways:
- Your deposits are automatically protected up to the limit at insured banks.
- The standard limit is $250,000 per depositor, per ownership category, per bank.
- Use ownership categories and multiple banks to maximize coverage.
- FDIC insurance only protects deposit accounts.
What is FDIC Insurance & How Does it Work?
Federal Deposit Insurance Corporation (FDIC) Insurance is a way the U.S. government guarantees the money that you keep in a deposit account is safe. This type of insurance protects your money up to a certain amount in the rare event that the bank you are keeping your money in fails. The coverage limit is currently $250,000 per depositor, per insured bank, for each ownership category.
FDIC insurance is automatic, meaning you don’t need to purchase the insurance when you open a deposit account. Upon account opening, your balance is automatically insured. Not all banks have FDIC insurance, but most U.S. banks are required to have it.
The Federal Deposit Insurance Corporation (FDIC) is an independent agency of the U.S. government. Created in 1933 during the Great Depression, the FDIC was founded to insure bank deposits in case the bank failed. The FDIC was established to increase the public’s trust in the banking system.
What Types of Accounts Does FDIC Insurance Cover?
Since FDIC insurance is designed to only cover deposit accounts at insured institutions, there are certain types of accounts that are eligible for coverage. Here is a breakdown of what the FDIC covers:
What are the FDIC Insurance Limits?
FDIC insurance limits are $250,000 per depositor, per account ownership category, per bank. As a consumer, there’s a strategy to maximize your FDIC insurance coverage by opening accounts in different ownership categories.
| Single Accounts (owned by one person) |
$250,000 per owner |
| Joint Accounts (owned by more than one person) |
$250,000 per co-owner
|
| Accounts with Beneficiaries (also known as Trust Accounts) |
$250,000 per beneficiary |
| Certain Retirement Accounts |
$250,000 per owner |
If you have any questions about FDIC insurance and its coverage, please visit: https://www.fdic.gov/resources/deposit-insurance/understanding-deposit-insurance/
Real Life Examples with FDIC Insurance
- Single Person at One Bank: Say you have $150,000 across a personal checking and savings account (all in your name at one bank). Your entire $150,000 balance is covered since the total is under the $250,000 coverage limit for a single owner.
- Married Couple Using Two Banks: Imagine that a husband and wife use two banks. They each have a Personal CD within their respective banks, and they are both on one joint savings account with one of the banks. This allows for $1,000,000 coverage across all accounts since both the husband and wife are covered up to $250,000 for their Personal CDs, as well as another $250,000 each for their joint account.
- Married Couple Using One Bank: Say a married couple has a balance of $600,000 in a joint savings account at one bank. In this situation, the coverage is capped at $500,000 for this account since each joint owner is covered up to $250,000. This leaves $100,000 of the couple’s money uninsured.
- Single Business Owner: Most business owners tend to keep their personal deposits and their business deposits at separate banks. For example, a business savings account at Bank A is insured up to $250,000 and a personal savings account at Bank B is also insured up to $250,000 since they are at separate institutions even though owned by the same individual.
How to Get Started with FDIC Coverage at Live Oak Bank
When you open a deposit account with Live Oak Bank, your funds are automatically covered by FDIC insurance upon account opening. This ensures your deposits are safe without extra steps.
However, if your business savings account has a balance over the FDIC insurance coverage limit of $250,000 – you can enroll in Live Oak’s Insured Cash Sweep. This allows up to $10 million in FDIC insurance coverage.
Have additional questions? Contact our Customer Success Managers, available Monday through Friday 8:00 a.m. – 8:00 p.m. EST, at 866.518.0286.
Commitment to Our Customers
The examples above are simply to explain how FDIC coverage works and are not intended as financial planning advice – be sure to have a conversation with your own financial advisor. Did you know that you can get help with calculating your FDIC coverage? You can find out how much FDIC coverage you have by using the
EDIE calculator found on the FDIC’s website.
It’s important to note that not all banks have FDIC insurance, so be sure to ask before you open a deposit account. Check to see if your bank has coverage on the FDIC’s website
.
Live Oak is committed to keeping your assets safe and we’ll work with you to maximize your FDIC insurance coverage, or set up an insured cash sweep, depending on your needs.
