FDIC Insurance

The Federal Deposit Insurance Corporation provides protection for bank accounts, including checking accounts, saving accounts, money-market deposit accounts and certificates of deposit. In the event of a bank failure, you’re insured for up to $250,000 per insured bank, with the insurance applying to each ownership category. Among the ownership categories are accounts solely in your name, accounts held jointly with someone else and bank products held in an IRA.

Suppose you have $250,000 in a savings account in your name and your spouse has a similar sum. You also both have IRAs that hold CDs worth $250,000. In addition, you have a joint account that holds $500,000. The FDIC would ascribe half the joint account to you and half to your spouse, and insure it for the full $500,000. Add it all up and you would together be covered for $1.5 million—and that’s just at one bank. You could do the same all over again at a different bank. To increase FDIC coverage, some financial firms will help you set up a so-called sweep account, where your money is spread across a variety of banks to increase your FDIC coverage.

Keep two caveats in mind. First, FDIC deposit insurance only applies to bank products. FDIC insurance would cover a money-market deposit account, but not a money-market mutual fund. Second, before purchasing a certificate of deposit through a broker, ask whether it’s covered by FDIC insurance. To learn more, go to FDIC.gov/deposit. In particular, check out the brochure entitled “Your Insured Deposits.”

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