FDIC deposit insurance protects money held in deposit accounts at banks insured by the Federal Deposit Insurance Corporation (FDIC) if one of those banks fails. According to the FDIC, no depositor has lost a penny of insured funds since the agency was founded in 1933.
The protection matters because it has limits. What is covered depends on the type of product, whether the bank is FDIC-insured, and how accounts are grouped.
What deposit insurance covers
The FDIC says its insurance covers deposits in all types of accounts at FDIC-insured banks. These include checking accounts, negotiable order of withdrawal (NOW) accounts, savings accounts and money market deposit accounts. Time deposits such as certificates of deposit (CDs) are covered too. Also covered are cashier’s checks, money orders and similar official items that a bank issues.
Coverage applies only if the bank is FDIC-insured. The FDIC offers an online search tool, BankFind Suite, for checking a bank’s status. The agency also says deposit insurance does not cover the default or bankruptcy of any institution that is not FDIC-insured.
What is not covered
The FDIC says deposit insurance does not cover non-deposit investment products. This is true even when an FDIC-insured bank offers them. The agency’s list of products that are not covered includes the following:
Stock investments, bond investments, mutual funds, annuities and life insurance policies. Also on the list are safe deposit boxes and their contents, U.S. Treasury bills, bonds or notes, municipal securities, and crypto assets.
How the coverage limit works
As of April 1, 2024, the FDIC says its insurance protects at least $250,000 for each depositor, in each ownership category, at every bank that carries FDIC insurance. An ownership category is a way of grouping accounts by how they are held. The FDIC lists these categories: accounts owned by a single person, joint accounts, certain retirement accounts (for example, Individual Retirement Accounts, or IRAs), accounts held in trust, accounts for employee benefit plans, accounts of corporations, partnerships and unincorporated associations, and government accounts.
All of a depositor’s deposits in the same category at the same bank are added together. The total is then compared with the limit. Because each category is counted separately, a depositor may qualify for more than $250,000 in total coverage by holding accounts in different categories.
The FDIC gives three examples. A person with a single account and a joint account at the same bank is insured up to $250,000 for the single account. The person is separately insured up to $250,000 for his or her ownership interest in the joint account. A person with single accounts at two different insured banks is insured up to $250,000 at each bank.
In the third example, a person has a checking account and a savings account, both single accounts, plus an IRA at the same bank. The two single accounts are added together and insured up to $250,000. The IRA is insured separately up to $250,000, because IRAs belong to a different ownership category. The FDIC provides an online tool, the Electronic Deposit Insurance Estimator (EDIE), to calculate how much of a person’s funds are covered.
Where the insurance money comes from
The FDIC maintains the Deposit Insurance Fund (DIF). The fund insures deposits and protects depositors of FDIC-insured banks. It also helps pay for the FDIC’s resolution activities when banks fail.
The FDIC says the U.S. government stands behind the DIF with its “full faith and credit.” The fund has two sources of money. One is assessments, which are insurance premiums paid by FDIC-insured institutions. The other is the interest the fund earns on money it has put into U.S. government obligations. The FDIC purchases Treasury notes, and the interest they pay adds to the fund’s growth.
What happens when a bank fails
The FDIC says bank failures are unlikely but do happen. When one occurs, deposit insurance protects the insured deposits at the closed bank. The agency says it acts quickly so that access to insured deposits is not interrupted.