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If you’ve ever listened to the radio or watched television, chances are you’ve heard a commercial for a bank where a voice at the end says something about being FDIC-insured. If you’ve never stopped to look it up, FDIC stands for Federal Deposit Insurance Corporation, and it is the federal agency that insures the money that Americans put into their commercial bank accounts. Even if you know that, though, you may still wonder just how much FDIC insurance covers in the event of a bank collapse or other serious problems with the financial system. If you want to maximize your savings, a financial advisor can help you put together a financial plan. What Is FDIC Insurance?The Federal Deposit Insurance Corporation (FDIC) is an independent federal agency that is responsible for safeguarding citizen deposits in the event that a bank fails in the United States. The agency insures a certain amount of deposits for every bank account that is opened by banks that it qualifies. The maximum insured amount of any account by the FDIC is $250,000. FDIC insurance is important because it provides peace of mind that the agency has backed the banking institution that you’re considering putting your money with. It also gives you up to $250,000 per account in the event that the bank can’t meet the demand of its customers. This prevents you from having to buy other insurance to protect your bank assets and allows your money to be kept in a safe place. What Does FDIC Insurance Cover?As stated above, the general rule is that the FDIC covers $250,000 per depositor, per FDIC-insured bank, and per ownership category. This applies to both principal, which is the money that you have deposited in your account and any money that you’ve earned as interest since depositing your money. It’s important to note that not all accounts at a bank are eligible for FDIC insurance. Covered products include:
FDIC insurance does not apply to these products, however:
You may get non-covered products through a bank or financial institution that advertises some of its products as FDIC-insured. You’ll want to check with someone at the bank before you buy a product so you know whether or not it is FDIC-insured. Are There Ways to Maximize FDIC Insurance Coverage?There are two basic ways to maximize your FDIC insurance. The first is to open accounts at different banks. You could have one account with up to $250,000 at Citibank and one with up to $250,000 at Bank of America. The FDIC will insure both of these accounts. It’s important to note, though, that different branches of the same bank are considered one bank. Thus, you can’t open one Chase account in Cleveland and one in New York and expect the FDIC to insure both. The other way to maximize FDIC insurance is to have accounts at the same bank in different ownership categories. You get up to $250,000 in coverage for each ownership category, even within the same bank. The ownership categories recognized by the FDIC are:
Married couples will have another option for maximizing their FDIC insurance coverage. You and your spouse each can open individual accounts at a single bank, resulting in each of you having up to $250,000 FDIC-insured. You can then also open a joint account and each has $250,000 insured in that account. Between those three accounts, you could have up to $1 million FDIC-insured at one bank. What Assets Should You Put in FDIC-Protected Accounts?You should use FDIC-insured accounts for any money that you want to protect. For many, this will mean any money that you have not invested in the stock market. If you are willing to risk losing money, you’d be better served to invest that money in stocks or bonds. Though these also carry risks, you’ll at least also have the potential to make returns. If you’re saving money for a rainy day fund, though, put it in an FDIC-protected account. Otherwise, you could end up losing the nest egg you thought you had, should something bad happen to the institution you are using. How to Contact the FDICYou can reach the FDIC in several ways:
The Bottom LineFDIC insurance covers up to $250,000 per depositor for each ownership category in each distinct bank. You can open accounts at different banks or in different ownership categories at one bank to maximize your insurance coverage. Use FDIC-insured accounts for any money that you want to protect against potential market shakeups or bank closures. Tips for Protecting Your Assets
Photo Credit: ©iStock.com/tinabelle, ©iStock.com/AndreyPopov, ©iStock.com/hsyncoban Ben Geier, CEPF® Ben Geier is an experienced financial writer currently serving as a retirement and investing expert at SmartAsset. His work has appeared on Fortune, Mic.com and CNNMoney. Ben is a graduate of Northwestern University and a part-time student at the City University of New York Graduate Center. He is a member of the Society for Advancing Business Editing and Writing and a Certified Educator in Personal Finance (CEPF®). When he isn’t helping people understand their finances, Ben likes watching hockey, listening to music and experimenting in the kitchen. Originally from Alexandria, VA, he now lives in Brooklyn with his wife. Categories
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