Quick FDIC Bank Q&A

How can someone tell if a bank is FDIC insured?

FDIC insured banks have to display an official sign at each teller window or station within the bank where transactions and deposits are regularly made.  To find out whether a bank has FDIC insurance coverage, a consumer can contact the FDIC using one of the resources listed with the FDIC, the easiest method is to go online to the FDIC website and use the tool, “bank find”.  This features looks up FDIC insured banks by name, state or other search parameters.  The FDIC can also be reached by calling toll-free at 1-877-275-3342.

If a bank does have FDIC insurance, which deposits are insured by the FDIC?

The FDIC insures all deposits at insured banks; this includes bank certificates of deposit, checking accounts, NOW accounts, savings accounts and money market deposit accounts up to the insurance limit per depositor.  Any person or entity can have FDIC deposit insurance in an insured bank located in the United States.  A person does not have to be a U.S. citizen or resident to have deposits insured by the FDIC.  The basic insurance amount is $250,000 per depositor per insured bank.  The $250,000 FDIC insurance limit for deposit accounts applies to the bank account savings balance plus accrued interest.

Does FDIC insurance protect creditors and shareholders?

FDIC insurance only protects depositors with a bank.  In some cases the bank customer with insured deposits may also be a creditor or shareholder in an FDIC insured bank.

Does the FDIC insure all investments sold by an insured bank?

The FDIC does not insure all financial products sold by a bank.  The FDIC does not insure the money invested in stocks, bonds, mutual funds, life insurance policies, annuities, or municipal securities, even if they were bought from an insured bank.  The FDIC also does not insure U.S. Treasury bills, bonds, or notes, but those are backed by the full faith and credit of the United States government.

How long does the FDIC take to pay insurance on deposits after an insured bank fails?

The closing of a bank by the FDIC is a result of the bank failure as determined by a federal or state banking regulatory agency.  Generally, a bank is closed when it is unable to meet its obligations to depositors and others.  Federal law requires the FDIC to make payment as soon as possible.  The FDIC, as the “Receiver” of the failed bank, assumes the task of pays insurance to the depositors up to the insurance limit and selling/collecting the assets of the failed bank and settling its debts, including claims for deposits in excess of the insured limit.  Historically, the FDIC pays insurance within a few days after a bank closing either by establishing an account at another insured bank or by providing a check.  Deposits purchased through a broker may take longer to be paid because the FDIC may need to obtain the broker's records to determine insurance coverage.

Bank customers of a failed bank with uninsured deposits receive the insured portion of their accounts just as insured depositors would.  They will have to wait longer to receive further payments for some or all of their uninsured deposits accounts held at the bank.  The amount of uninsured deposits funds they may receive, if any, is based on the sale and funds received by the FDIC on the failed bank's assets.  Depending on the quality and value of these assets in the failed bank, it may take several years to sell the assets.  As the failed bank assets are sold and disposed of, uninsured depositors will receive periodic payments on their uninsured deposit claim as the funds become available.

Does the FDIC insure an unpaid cashier's check, interest check, money order, or expense check issued by an insured bank?

If a depositor holds one or more of these items from an insured bank, and the insured bank fails before the item is cleared, the FDIC will add the item to any other deposits held in the same ownership category at the same insured bank.  For example, an outstanding interest check payable to a depositor will be added to the depositor's other single ownership accounts, if any, and the total insured up to $250,000.

Does the FDIC insure safe deposit boxes if a bank fails?

The FDIC does not insure safe deposit boxes or their contents.  In the event of a bank failure, the FDIC in most cases arranges for an acquiring bank to take over the failed bank's offices, including locations with safe deposit boxes.  When the failed bank's deposits are assumed by a healthy bank, the branch offices usually reopen the next business day.  At that time, you will have access to your safe deposit boxes.  If no acquirer is found, safety deposit box account holders would be sent instructions for removing the contents of their boxes.

How does the FDIC determine ownership of deposits?

The FDIC presumes that deposits are owned as shown on the deposit account records of the insured bank.  The deposit account records of an insured bank include account ledgers, signature cards, certificates of deposit, passbooks, and certain computer records. Account statements, deposit slips and cancelled checks are not considered deposit account records for purposes of determining deposit insurance coverage.

When an insured bank fails, what evidence will the FDIC require to determine the amount of insurance coverage for a living trust account?

The FDIC simplified its rules regarding insured interest-bearing accounts that have assigned living beneficiaries.  The FDIC has a process for verification of the owners of living trust accounts that are insured depositors in a failed bank.  When an insured bank fails, the FDIC would look at the depositors account title to determine whether the bank account is held by a living trust.  The FDIC would then ask the owners of the account through the trust to provide a copy of the trust document, which the FDIC would review to identify the beneficiaries and determine their interests in the account.  The bank account owner also may be required to complete an affidavit attesting to the relationships of the beneficiaries to the trust owner.  The owner or trustee of either a formal revocable trust or an informal trust deposit may be required to complete a declaration of testamentary trust statement attesting to the relationships of the beneficiaries to the trust owner.  Note that to qualify for coverage in the revocable trust account category, the account title must indicate the existence of a trust relationship.  This requirement can be met by using the term "living trust," "family trust," or similar language in the account title, or by including other words or acronyms indicating that the account is held by a trust.

Can I increase my insurance coverage by placing deposits with different insured banks?

Since deposit limits are based on the amount held per bank, holding funds in multiple banks will have the result of increased insurance coverage.  Deposits with each FDIC-insured bank are insured separately from any deposits at another insured bank.  The only consideration regarding different banks is that if an insured bank has multiple branch offices, the main office and all branch offices are considered one insured bank.  The deposit insurance limit is not expanded by holding multiple accounts at different bank branches of the same insured bank.  Similarly, deposits held with the Internet division of an insured bank are considered the same as deposits with the "brick and mortar" part of the bank, even if the Internet division uses a different name. If two banks are affiliated, such as having a common holding company, but are separately chartered (indicated by having two different FDIC Certificate numbers), deposits in each bank would be separately insured.

Can I increase my insurance coverage by dividing my deposits into several different accounts at the same insured bank?

Insured accounts with each FDIC-insured bank are insured separately from any deposits at any other insured bank.  Deposit insurance coverage can also be increased at one bank if the accounts are held with different forms of ownership. These different forms of ownership include single accounts, retirement accounts, joint accounts and revocable trust accounts.  Account ownership categories determine the level of coverage per institution, no matter how many bank branch offices you use.  Therefore, it is possible to have deposits of more than $250,000 at one insured bank and still be fully insured.

Simple bank account ownership structures:

Single Accounts (owned by one person): $250,000 per owner.
Joint Accounts (two or more persons): $250,000 per co-owner.
IRAs and other certain retirement accounts: $250,000 per owner.
Revocable trust accounts: Each owner is insured up to $250,000 for the interests of each beneficiary, subject to specific limitations and requirements.

 
Is my bank IRA insured separately with the FDIC?

Self-directed retirement accounts are a separate ownership category insured by the FDIC. A husband and wife can have separate IRAs insured up to $250,000 each, this a permanent insurance limit.