FDIC Insurance

FDIC insurance is a federal guarantee on deposits at insured banks, backed by the Federal Deposit Insurance Corporation, an agency created in 1933 after roughly 4,000 bank failures made the case for one. The standard coverage is $250,000 per depositor, per insured bank, per ownership category. It covers checking accounts, savings accounts, money market deposit accounts, and certificates of deposit, principal plus accrued interest. No US depositor has lost a dollar of FDIC-insured deposits since the agency opened its doors.

The coverage does not extend to anything invested: stocks, bonds, mutual funds, ETFs, crypto, annuities, and the contents of a safe deposit box all sit outside the umbrella. Treasury securities are not FDIC-insured either, but they carry the full faith and credit of the US government directly. Ownership categories do the heavy lifting: a single account, a joint account, and certain retirement accounts each carry their own $250,000 at the same bank.

The mechanics live in three words: depositor, bank, category. Coverage applies per depositor per insured bank, so two accounts at the same bank in the same category share one $250,000 limit. The same two accounts at different banks carry $250,000 each. Ownership categories stack at one institution: an individual account gets $250,000, a joint account gets $250,000 per co-owner, and certain retirement accounts such as IRAs get a separate $250,000. Revocable trusts compute coverage per beneficiary, which is how families legitimately insure seven figures at a single bank.

The fund behind the promise is the Deposit Insurance Fund, financed by assessments on member banks rather than by taxpayers. The 2023 failures of Silicon Valley Bank and First Republic tested it hard. The FDIC invoked a systemic risk exception and covered all depositors, insured and uninsured, at a cost north of $20 billion. The industry repaid it through a special assessment, and the standard rule remained $250,000.

The limit was raised from $100,000 to $250,000 in October 2008 and made permanent by the Dodd-Frank Act in 2010. Roughly 99% of US depositors fall entirely inside the standard coverage. The planning exercise is for the other 1%.

FDIC insurance is the reason cash can sit in a bank without a second thought and the reason six figures should never sit in one without a plan. The guarantee is per bank, not per account, which is where most plans fail.

I watched a colleague named Brent (yes, that Brent) hold $310,000 from a house sale in a single-owner account at one bank for four months because it was temporary. He was $60,000 past the cap the entire time and never noticed; had the bank failed in that window, the uninsured chunk would have become a claim in receivership, paid out over years at partial value.

The highest-leverage thing most Americans can do is map every deposit against the three-word rule and split across banks or categories before a balance grows past the cap. Large balances can use bank-run networks such as IntraFi, which spread one deposit across many insured banks. Compare insured cash options with the savings interest calculator, or see how CDs fit the coverage in the certificate of deposit entry.