The old cliché used to be “Safe as money in the bank,” but with an increase in recent years of the number of banks failing, people are starting to ponder just what their FDIC insurance protection covers if their bank goes under. According to FDIC, prior to 2011, almost one-third of all bank deposits were not covered by FDIC insurance, thereby putting many people in serious jeopardy should their bank fail.
The Federal Deposit Insurance Corporation (FDIC) believed that three classes of people were uncovered by insurance. The first class was made up of those people who were aware that their funds exceeded the federal insurance protection levels, but had faith in their own particular bank. The second class was made up of those people who, frankly, were given the wrong information by their bank as to their coverage. The third class was made up of those people who just did not understand the FDIC rules.
In response to fears brought about by the recession, the FDIC made a temporary change in the amount of FDIC insurance coverage for bank accounts that would last for the years 2011 and 2012. Under this temporary change, all funds deposited in non-interest bearing accounts would be unlimited. Essentially, this unlimited coverage was limited to traditional non-interest earning checking accounts or demand deposit accounts upon which the bank paid no interest.
For interest-bearing accounts, such as interest-bearing checking accounts, savings accounts CDs, and money-market accounts, each depositor is covered by FDIC interest of up to $250,000 for the combined deposits in each individual bank, he or she may have such accounts.
However, additional FDIC coverage is also available for different types of accounts. For example, in addition to the $250,000 coverage you have for income-earning accounts held in your name individually, you also will be able to qualify for an additional $250,000 FDIC insurance coverage for amounts you have in your share of a joint bank account as well as an additional $250,000 FDIC insurance for your share as a beneficiary of a revocable trust you create.
Finally, you also receive FDIC insurance coverage of up to $250,000 for amounts you hold in retirement accounts, such as IRAs or Keogh plans at the bank.