Deposit insurance: know what is covered

Identify the institution and ownership

Start with the legal institution holding your money. Accounts with different names or brands may be held at the same insured bank. Coverage depends on the actual deposit arrangement and how the account is owned, not simply the number of apps or accounts you use.

List each account’s balance and ownership category. Single, joint, and other categories have specific rules. Avoid assuming that adding a beneficiary or opening another account automatically produces a particular result; check the applicable FDIC guidance.

Distinguish deposits from investments

Checking accounts, savings accounts, and CDs at an FDIC-insured bank are deposit products. Investments such as stocks, mutual funds, and crypto are not FDIC-insured deposits. A money market deposit account is different from a money market mutual fund.

Federal credit-union share insurance is a separate system administered by the NCUA. If you use a credit union, confirm its insurance status and the rules relevant to your ownership arrangement through the appropriate official resources.

Review coverage when life changes

A large home-sale deposit, inheritance, business payment, or change in account ownership can alter the coverage picture. Make reviewing the arrangement part of the transaction plan rather than waiting until funds have accumulated.

Use the FDIC’s official guidance and estimator for your specific account setup. For complicated trusts or ownership arrangements, seek qualified help rather than extrapolating from a simple example. Keep records of which institution holds each balance.

The three parts of the limit

The FDIC states the rule as $250,000 per depositor, per insured bank, for each account ownership category. Each part matters. Per depositor means each person is counted separately. Per insured bank means the limit applies at each FDIC-insured bank you use. Per ownership category means single accounts, joint accounts, certain retirement accounts, trust accounts, and other categories are insured separately from one another.

The FDIC adds together all of your deposits in the same ownership category at the same bank before applying the limit. Checking, savings, money market deposit accounts, and CDs all count, and coverage includes both principal and accrued interest. Opening a second savings account at the same bank in your own name does not create a second limit.

Sources: FDIC: Your insured deposits · FDIC: When a bank fails

Worked example: a couple at one bank

Suppose Alex has $200,000 in a single account, Jordan has $150,000 in a single account, and they share a $400,000 joint account, all at the same insured bank. Each single account is below $250,000 and fully insured. For the joint account, the FDIC assumes co-owners’ shares are equal unless the account records say otherwise, so each has a $200,000 share, and each co-owner’s shares of all joint accounts at the bank are insured up to $250,000. All $750,000 is insured.

If they added $150,000 to the joint account, each share would rise to $275,000, and $50,000 of the $550,000 joint balance would be uninsured, $25,000 for each of them. The joint category also has conditions: all co-owners must be living people with equal rights to withdraw.

Sources: FDIC: Your insured deposits · FDIC: Deposit insurance at a glance

Trust and payable-on-death accounts after the 2024 change

Accounts with named beneficiaries, including payable-on-death accounts and revocable and irrevocable trusts, fall in the trust category. Since April 1, 2024, each trust owner is generally insured up to $250,000 per unique eligible beneficiary, up to $1,250,000 for five or more beneficiaries, across all of that owner’s trust accounts at the same bank. The FDIC applies the change to existing and new accounts, including CDs.

An owner who names three children as payable-on-death beneficiaries is covered up to $750,000 at that bank. Naming six beneficiaries does not raise coverage above $1,250,000. Two owners with the same three beneficiaries would be covered up to $1,500,000, following the FDIC’s formula of owners times distinct beneficiaries times $250,000, capped at $1,250,000 per owner. For complex trusts, use the FDIC’s estimator or ask a professional.

Sources: FDIC: Your insured deposits · FDIC: Deposit insurance at a glance

Worked example: proceeds from a home sale

Large one-time deposits are when coverage most often falls short. Suppose Alex receives $420,000 from a home sale into a single account that already holds $60,000. The single category at that bank now holds $480,000, so $230,000 is above the limit.

There are several ways to bring it within coverage, each with trade-offs. Moving part of the money to another FDIC-insured bank gives it a separate $250,000 limit. If Alex has a co-owner, a joint account at the same bank is a separate category. A payable-on-death designation places funds in the trust category, with coverage based on the number of beneficiaries. Before choosing, run the plan through the FDIC’s Electronic Deposit Insurance Estimator, which shows what is insured at a given bank and what portion, if any, exceeds the limit.

Sources: FDIC: Electronic Deposit Insurance Estimator (EDIE)

What FDIC insurance does not cover

The FDIC lists products that are not insured even when bought at an insured bank: stocks, bonds, mutual funds, crypto assets, life insurance policies, annuities, municipal securities, safe deposit boxes and their contents, and U.S. Treasury bills, bonds, and notes, which the FDIC notes are backed by the full faith and credit of the U.S. government. A money market mutual fund is an investment; a money market deposit account at an insured bank is a deposit.

Deposit insurance protects against the failure of an insured bank. It does not protect against losses from theft or fraud, which are addressed by other laws.

Sources: FDIC: Financial products that are not insured · FDIC: Deposit insurance at a glance

Apps, fintech companies, and partner banks

Many apps hold customer money through a partner bank. The FDIC warns that nonbank companies themselves are never FDIC-insured, and that money sent to one is not eligible for deposit insurance until the company deposits it at an insured bank and other conditions are met. FDIC insurance does not protect against the insolvency or bankruptcy of a nonbank company.

Before keeping a large balance in an app, find out which bank holds the money, whether the account is in your name, and how the company records each customer’s share. If those answers are unclear, an account opened directly with an insured bank is simpler to verify.

Sources: FDIC: Banking with third-party apps

If a bank fails, and credit unions

Federal law requires the FDIC to pay insured deposits as soon as possible after an insured bank fails, and the FDIC states that its goal is to make payments within two business days. When the FDIC pays depositors by check, it says payments usually begin within a few days of the closing.

Credit unions use a parallel system. The NCUA’s Share Insurance Fund insures individual accounts at federally insured credit unions up to $250,000, and a member’s interest in all joint accounts combined up to $250,000, with IRA and Keogh retirement accounts protected separately. Like the FDIC, the NCUA does not insure safe deposit boxes or crypto assets.

Sources: FDIC: Payment to depositors after a bank failure · NCUA: Share insurance coverage

Your next-step checklist

• Confirm each bank is FDIC-insured using BankFind.
• Group balances by bank and ownership category.
• Include accrued interest when a balance is near the limit.
• Check coverage before a large deposit such as home sale proceeds.
• Review beneficiaries on trust and payable-on-death accounts.
• Find out which bank holds money kept in an app.