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What to Know About the New Law Affecting FDIC Insurance Coverage
As reported in our Summer issue, President Obama in July signed a new law that includes two key provisions involving federal deposit insurance. Because calls from the public indicate that there continues to be some confusion over what has or hasnít changed with FDIC insurance coverage, we offer the following overview of the two key provisions:
The basic standard maximum deposit insurance amount has been permanently increased from $100,000 to $250,000. Under previous law, the basic FDIC insurance amount was temporarily increased to $250,000 in 2008, but it was scheduled to return to $100,000 on January 1, 2014. The permanent $250,000 insurance limit will be especially helpful for consumers who expect to have more than $100,000 in their bank starting in 2014 ó for example, people who have or are considering multi-year certificates of deposit (CDs) ó and who want to be sure their funds will be fully protected by the FDIC.
What else to remember: "You can have far more than $250,000 in one bank and still be fully insured," explained FDIC attorney Christopher Hencke. "That's because the basic insurance coverage limit applies per person, per institution, for each account ownership category under the FDIC's rules. That means your single accounts at one bank are insured up to $250,000, your share of all joint accounts at that bank is separately insured up to another $250,000, and so on down the list of categories."
A new, temporary insurance category will fully insure all funds, regardless of the dollar amount, in checking accounts that pay no interest. The new coverage will begin December 31, 2010, and run for two years. It is similar in certain respects to a temporary FDIC program already in effect that will be replaced at the end of the year.
"Unlike the temporary program being replaced at the end of this year, the new coverage will apply to all federally insured institutions," noted FDIC Supervisory Counsel Joe DiNuzzo. "Another difference is that the new coverage will not apply to checking accounts that pay interest. Those accounts will be insured up to $250,000 under the FDIC's general deposit insurance rules."
What else to remember: The new full-insurance category will be especially helpful for consumers who have a very large sum of money they want to safely park in a bank account for a brief period, until it can be invested elsewhere.
"A good example would be an individual who sells his or her home for $500,000 and wants to deposit that money in the bank without fear of losing anything over the $250,000 insurance limit if the bank fails," Hencke said. "But depositors also should understand that they will earn no interest on their funds because this new, unlimited coverage will apply only to transaction accounts, such as checking accounts, that earn no interest."
To be sure that your account qualifies for this temporary, unlimited FDIC insurance coverage, speak with a customer service representative at your bank.
To learn more about these and other aspects of FDIC insurance coverage, visit www.fdic.gov/deposit/deposits or call 1-877-ASK-FDIC (1-877-275-3342).
Last Updated 11/19/2010