Updated Fri, Oct 23 2020 2:39 PM EDT
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When you open a deposit account, such as a savings or checking account, you may see a notice stating the account is FDIC-insured.
The Federal Deposit Insurance Corporation (FDIC) is an independent agency of the U.S. government that protects and reimburses your deposits up to the legal limit of $250,000 in the event your FDIC-insured bank fails.
Though it's not very common, a bank can fail when it takes on too much risk, such as extending credit to borrowers that wind up defaulting. When this happens, the bank goes belly up, putting its customers' assets in jeopardy. But thanks to FDIC insurance, you can receive reimbursement up to the maximum amount so your funds aren't lost for good.
FDIC insurance covers checking, savings and other deposit accounts up to a standard amount of $250,000 — but there are a few caveats. Namely, the $250,000 limit is per account holder, not per account, like you might think.
But before we dive into insurance limits, here are the basics about FDIC insurance you need to know.
The FDIC covers many common deposit accounts, but it doesn't insure investment accounts. Here are the following types of covered accounts:
- Checking accounts
- Savings accounts
- Negotiable order of withdrawal (NOW) accounts
- Money market deposit accounts (MMDAs)
- Time deposits such as certificates of deposit (CDs)
- Cashier's checks, money orders and other official items issued by a bank
Meanwhile, these accounts are ineligible for FDIC coverage:
- Stock investments
- Bond investments
- Mutual funds
- Life insurance policies
- Annuities
- Municipal securities
- Safe deposit boxes or their contents
The standard coverage limit is $250,000 per account owner, per each of the ownership categories we include in the table below.
That means you could technically qualify for more than $250,000 in coverage if you hold accounts in more than one ownership category, either as an individual or with a joint account holder.
For instance, a couple with a joint checking account that's FDIC-insured can receive insurance for up to $500,000 for the same shared account ($250,000 per co-owner). And if each of you open your own individual checking account separately (under the category of "single account") it would also have its own $250,000 coverage on top of your joint checking's $500,000 coverage.
You can also see that trusts, benefit plans and other accounts factor in whether there are beneficiaries, participants or custodians connected to it.
Here's a breakdown of the FDIC coverage broken up by type of account owner.
| Coverage limit |
| $250,000 per owner |
| $250,000 per co-owner |
| $250,000 per owner |
| $250,000 per owner per unique beneficiary |
| $250,000 per corporation, partnership or unincorporated association |
| $250,000 per unique beneficiary that's entitled to the account |
| $250,000 per plan participant that's entitled to the account |
| $250,000 per official custodian (more coverage may be available) |
Most checking accounts and savings accounts provided by major banks offer the standard FDIC insurance. Lots of these checking accounts also come with no monthly maintenance fees, which can save you up to $15 a month.
As for savings, going with an FDIC-insured high-yield savings account can earn you more than 10 times the national interest rate.
Here are some of CNBC Select's top-rated checking and savings accounts.
Learn More
Capital One Bank is a Member FDIC.
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Ally Bank is a Member FDIC.
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Goldman Sachs Bank USA is a Member FDIC.
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Synchrony Bank is a Member FDIC.
Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
FDIC insurance protects your assets in a bank account (checking or savings). SIPC insurance, on the other hand, protects your assets in a brokerage account. These types of insurance operate very differently. Let's take a look at how they protect you.
What is FDIC insurance?
The Federal Deposit Insurance Corporation (FDIC) is a federal agency that protects customers against the loss of deposit accounts (such as checking and savings) in FDIC-insured banks. Here are some important facts to know about FDIC insurance:
- The basic FDIC insurance limit is currently $250,000 per account holder per insured bank for deposit accounts and $250,000 for certain retirement accounts deposited at an insured bank. These insurance limits include both principal and accrued interest.
- The FDIC does not insure money invested in stocks, bonds, mutual funds, life insurance policies, annuities, municipal securities, or money market funds, even if these investments were bought from an insured bank.
It's always wise to put your money in an FDIC-insured bank. Whether it's your emergency fund or short-term cash, there's no need to take unnecessary risks.
How is FDIC insurance coverage determined?
The FDIC insurance limit applies to each account holder at each bank. Here is how the FDIC defines coverage for different account holders by some common ownership types:
- Single accounts are deposit accounts (e.g., checking, savings) owned by one person. FDIC insurance covers up to $250,000 per owner for all single accounts at each bank.
- Joint accounts are deposit accounts owned by two or more people. FDIC insurance covers up to $250,000 per owner for all joint accounts at each bank.
- Certain retirement accounts, such as IRAs and self-directed defined contribution plans, are covered by FDIC insurance up to $250,000 for all deposits in such retirement accounts at each bank.
What is SIPC insurance?
The Securities Investor Protection Corporation (SIPC) is a nonprofit membership corporation that was created by federal statute in 1970.
Unlike the FDIC, SIPC does not provide blanket coverage. Instead, SIPC protects customers of SIPC-member broker-dealers if the firm fails financially. Coverage is up to $500,000 per customer for all accounts at the same institution, including a maximum of $250,000 for cash.
SIPC does not protect investors if the value of their investments falls. When you think about it, this makes sense. After all, market losses are a normal part of the risk of investing.
For more information, go to SIPC.org.