ARE MY BANK ACCOUNTS INSURED?

When we are depositing money into our bank accounts, we are entrusting the money to the bank or financial institution. To some, this might seem like a daunting and difficult task, as you are pooling your money with a third party that does not have the same financial interest in your personal savings that you have for yourself. To ease yourworries, there is a corporation in the United States that guarantees that you are money is safe up to a certain dollar amount. This corporation is called the FDIC.

Federal Deposit Insurance Corporation (FDIC)

The Federal Deposit Insurance Corporation, hereafter and commonly known as the FDIC, acts as an independent agency of the United States which protects you against the complete loss of your deposits, subject to certain limits, in the scenario that an insured financial institution fails. In these circumstances, failure of a financial institution means the bank, union or savings association does not have enough capital to satisfy all withdrawal requirements or declare bankruptcy. The FDIC carries insurance which is safeguarded by the United States government.

Deposit Insurance

In the event that a financial institution does fail, one of two different scenarios can occur in regards to the response from the FDIC. The FDIC insures the financial institution deposits, which means that the FDIC will pay insurance to the depositors up to and including the insurance limit. If we are to analyze historical data in regards to the timing of payments, the FDIC usually has paid within a few days after the closing of a financial institution, most commonly the following business day. This is done by either issuing each depositor with a new account located at another insured financial institution, which would be equal in amount to the insured balance of the account at the previous failed institution, or by providing each depositor a guaranteed check for the insured tendered balance of the account at the time of the failure.

How much am I covered for?

The FDIC does not cover your entire loss if it exceeds a certain amount or does not meet certain criteria. The FDIC covers the depositors of a financial institution that has gone under on a dollar-for-dollar basis, which means the principal in addition to any accrued interest that is owed to the depositor, through and at the date of the failure, to a maximum of $250,000.

Some deposits that are in excess of $250,000 that are also linked to trusts established by a third party may be delayed in payment so that the accounts can be properly reviewed in order to ascertain the total value of the available insurance coverage for the deposit.