A big reason to keep your deposits at a recognized bank is the deposit insurance offered by the Federal Deposit Insurance Corporation (FDIC). Most of you reading this are too young to remember the pain that people felt when their deposits disappeared along with their bank during the Great Depression that occurred about 90 years ago. But the government felt the pain, not just the depositors, which is why the FDIC exists, and why you don’t have to worry about your deposits disappearing if the bank fails.
For a long time the limit of insured deposits was $100,000. But that was when $100,000 was a lot of money. Now the insurance for each depositor is up to $250,000 with some special considerations.
Each depositor at each insured institution is “fully insured” up to $250,000. The word “fully” there doesn’t mean what you’d think it means, the total amount on deposit; it means that dollar amount less than or equal to $250,000.
The key concepts to FDIC insurance coverage are “each depositor at each insured institutions” and “insured account categories”.
The FDIC insurance categories
There are six common categories based on Single, Joint, (certain) Retirement, Employment Benefit, Revocable Trust and Irrevocable Trust accounts.
One example provided by the FDIC to show what “fully insured” can mean is in the case of a Joint Account. Say that two or more people have equal rights to (are co-owners) of a deposit account where there are no beneficiaries named on the account. “Under the FDIC rules, each co-owner is separately insured for up to $250,000 for his or her ownership share in all qualifying joint ownership deposits he or she has in any one bank.” The cited example is of two co-owners who “would be fully insured for up to $500,000 in a joint account, in addition to any single ownership or other accounts they might have at the same bank.”
There is much more to know about FDIC insurance and its categories. Insurance coverage is also extensive for other types of account coverage, such as Revocable and Irrevocable Trust accounts. Talk to any Peoples Bank deposit specialist for more information.