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Important Update: Changes in FDIC Deposit Insurance Coverage

The FDIC deposit insurance rules have undergone a series of changes starting in the fall of 2008. As a result, certain previously published information related to FDIC insurance coverage may not reflect the current rules. For details about the changes, visit Changes in FDIC Deposit Insurance Coverage. For more information about FDIC insurance, go to www.fdic.gov/deposit/deposits/index.html or call toll-free 1-877-ASK-FDIC (1-877-275-3342). For the hearing-impaired, the number is 1-800-925-4618.

Fall 2008 – Special Edition: Your New, Higher FDIC Insurance Coverage

Basic FDIC Insurance Coverage Temporarily Increased to At Least $250,000 Per Depositor
Other changes expand the protection of certain trust and checking accounts


A bank with people in front of it

With banks and the economy in the news so much lately, many people are thinking more about the safety of their money. The FDIC has some good news – your FDIC deposit insurance coverage has significantly increased.

"Clearly, the good news for consumers, small businesses and other depositors is the increased likelihood that they can have more of their deposits – or possibly all of their deposits – fully insured at their bank," said Kathleen Nagle, FDIC Associate Director for Consumer Protection.

Here is an overview of what you need to know about your new FDIC insurance coverage.

The basic limit on federal deposit insurance coverage has been temporarily increased from at least $100,000 to at least $250,000 per depositor. That's the result of a new law passed by Congress in October 2008. It means that if you (or your family) have $250,000 or less in all of your deposit accounts at the same insured bank, you don't need to worry about your insurance coverage – your deposits are fully insured.

As always, you may qualify for more than the basic insurance coverage at one insured bank. Thatís because the FDIC provides separate insurance coverage for deposits held in different "ownership categories." For example, under current rules, your deposits in:

  • Single accounts (in one name only) are insured up to $250,000;
  • Joint accounts (for two or more people) are protected up to $250,000 per owner;
  • Certain retirement accounts including IRAs, are covered up to $250,000; and
  • Revocable trust accounts (deposits intended to pass along to named beneficiaries when the account owner dies) can be protected up to $250,000 for each named beneficiary subject to specific limitations and requirements.

The basic FDIC insurance limit is scheduled to return to $100,000 on January 1, 2010. Let's suppose you purchase two CDs (certificates of deposit) that will mature in 2010 or later, and they total $105,000. Under current law, those CDs would be fully insured through year-end 2009. But starting on January 1, 2010 – when insurance coverage is scheduled to return to $100,000 – $5,000 plus accrued interest would be uninsured.

However, not all deposit accounts would revert back to $100,000 of insurance coverage in 2010. Certain retirement accounts will continue to be protected up to $250,000 because that is the permanent level previously set by Congress.

The FDIC has eased the rule governing the insurance coverage of revocable trust accounts. The most common example of a revocable trust account is a payable-on-death (POD) account that can be set up at a bank with a simple, written declaration from the depositor (usually on the "signature card" in the bank's records) that the funds in a savings or checking account will belong to one or more named beneficiaries upon this person's death.

Another common example of a revocable trust account is a "living trust" account deposited in connection with a formal, legal document typically called a living trust or a family trust drafted by an attorney.

What's new is that the FDIC no longer considers only the account owner's spouse, child, grandchild, parent or sibling as "qualifying beneficiaries" for additional insurance coverage. Under the new rule, effective September 26, 2008, an account owner can name almost any beneficiary – including a niece, nephew, cousin, in-law, friend, charity or a nonprofit organization – and the owner will qualify for deposit insurance coverage for each beneficiary($250,000 if there is one beneficiary, $500,000 if there are two, and so on).

"The new rule is, in part, intended to be fair to depositors who were unable to obtain insurance coverage under the previous rules because they had no qualifying beneficiaries," explained FDIC attorney Joe DiNuzzo.

Be aware that revocable trust accounts are subject to specific requirements that can affect the total insurance coverage, especially if an account owner names six or more beneficiaries and they all arenít being given an equal share of the account.

In addition, FDIC officials cautioned bank customers against adding beneficiaries to a trust account just to increase their insurance coverage.

"A trust account is the equivalent of a contract specifying who is legally entitled to your money when you die," said Martin Becker, a Senior Consumer Affairs Specialist at the FDIC. "That's why naming beneficiaries shouldnít be simply an attempt to get the maximum FDIC insurance coverage – itís a serious decision about who will inherit your money."

Through year-end 2009, certain checking accounts at participating institutions will be fully insured by the FDIC, no matter how much money is in them. This special coverage applies only to no-interest checking accounts and certain other low-interest transaction accounts. While the rule is primarily for businesses with large balances in their checking accounts, consumers also can benefit.

For example, let's say you and your spouse sell your home in early 2009 and you'll be using the proceeds – $800,000 – to buy another house a week later. If you deposit $800,000 jointly into an eligible checking account at a participating bank – and the bank fails – all the money would be fully protected by FDIC insurance. Otherwise, if the money is not in an eligible checking account at a participating institution, it would only be covered to $500,000 (assuming you have no other joint accounts at the same bank), leaving $300,000 at risk of loss if the bank fails and the funds are still in the account.

For more information about the rule changes, visit www.fdic.gov/deposit/deposits/changes.html. And if you have questions or concerns about your deposit insurance coverage in general, you can always go to our Web site or call the FDIC; learn how to contact us on For More Help from the FDIC About Deposit Insurance and Other Topics.†

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Last Updated 5/26/2009

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