What the FDIC Does and Does Not Insure

The FDIC insures many of the accounts involved in everyday banking -- but it doesn't insure everything. Here's a look at what is and isn't covered by the FDIC.

The FDIC insures:

• Checking accounts
• Savings accounts
• Revocable and irrevocable trust accounts
• Money market deposit accounts
• Certificates of Deposit (CDs)
• Negotiable Order of Withdrawal accounts (NOWs)
• Individual Retirement Accounts (IRAs -- insured up to $250,000)

A Negotiable Order of Withdrawal (NOW) account is a type of bank account that earns interest. The account holder can write checks from such an account.

The FDIC divides insured accounts into different categories. These categories include single accounts, joint accounts, qualifying retirement accounts, revocable and irrevocable trusts and government accounts. To learn more about these categories, visit the FDIC Web page that describes ownership categories. [FDIC]

What do these categories mean to you? Say you have more than $100,000 in a bank and want to have all of it insured. The FDIC will insure your money if it is divided amongst deposit accounts in different categories. For example, you could have $130,000 in a single-person savings account. The FDIC would insure $100,000 of that $130,000, leaving $30,000 uninsured.

At the same bank, you could have $170,000 in a joint checking account with your spouse. Each of you owns an equal amount of the deposited money. The FDIC treats a joint account as if it were two single accounts owned by two different people. As a result, your joint account would be insured up to $170,000 ($85,000 per owner). If you wanted to cover that uninsured $30,000 in your single savings account, you could transfer it to your joint account. All $200,000 would then be insured at the maximum $100,000 per owner.

To determine your exact FDIC coverage at an insured financial institution in the United States, contact your banker or visit the FDIC.

The FDIC does not insure:

• Stock market investments
• Municipal securities
• Annuities
• Bonds
• Life insurance policies
• Mutual funds

You might participate in these investment opportunities through a bank insured by the FDIC, but the FDIC does not insure these investments. Why not? First of all, they are not deposit accounts. Second, it would be impractical. Except for life insurance policies, these accounts' respective values are subject to fluctuations in economic, social and political circumstances, making them bad gambles for the FDIC. These types of accounts generally involve much larger amounts of money than the FDIC would be able to reliably and consistently cover. You might compare insuring such an account to insuring a Ferrari in a war zone.

The FDIC has undergone many changes over the years, but its primary purpose has remained the same. And the FDIC has -- so far -- never failed to fulfill that purpose. Since 1933, every depositor at every failed insured bank has been paid the insured amount owed him.

If you'd like to learn more about the Federal Deposit Insurance Corporation, you can follow the links on the next page.