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What Is The FDIC And What Does Its Insurance Cover?

Cathie Ericson4-minute read
November 30, 2020

Doesn’t the phrase “FDIC insured” have a comforting ring to it when you’re thinking about putting your money in the bank? It means that should something happen, your money is secure.

But as a depositor, you are likely wondering if there is a limit to how much money is “FDIC insured?” And what about other financial products; do they receive similar insurance coverage? And who is this benevolent FDIC, anyway? Let’s find out what the FDIC is and what exactly that deposit insurance does (and doesn’t) cover.

FDIC Defined

Almost universally known by its acronym, “FDIC,” the full name of the regulatory body is the Federal Deposit Insurance Corporation. It’s a government agency that has been around since 1933, developed in response to a need to address a wave of bank failures caused by “bank runs.” Those occurred when people demanded all their money from their bank at once and the banks weren’t prepared to pay out every dime. Subsequently, many lost their hard-earned savings, along with confidence in the banking system, until this new independent government agency stepped in to restore it.

The stated mission of the FDIC is “to maintain stability and public confidence in the nation's financial system.” To that end, it acts as a watchdog of sorts to examine and supervise financial institutions to protect consumers and ensure their money is safe.

That’s why you’ll want to look for an “FDIC-insured bank” when determining where to park your money. The good news is that will include most situations, as the FDIC supervises and examines more than 5,000 banks and savings associations to ensure they are safe and sound.

In order to maintain public confidence in banks, the FDIC protects depositors and their assets. Standard insurance is up to $250,000 per depositor, per insured bank, per type of account. In other words, if your checking account tops that limit (lucky you, moneybags!) you should likely open another account at another FDIC-insured bank to protect that money, too. However, since the $250,000 applies to each “type” of account (and we cover below exactly which sorts of deposit accounts that protection extends to), that means it would provide $250,000 worth of protection to your checking account and savings account (or any other type of covered account) even if it was at the same bank.

The FDIC is proud to state that since the inception of the program on January 1, 1934, no depositor has lost a penny of insured funds as a result of a bank failure.

Wondering how you get this great insurance? First, make sure you are using an FDIC-insured bank. To find out, look for the FDIC sign at your bank; if you’re unsure you can call the FDIC at (877) 275-3342 or verify using the FDIC's BankFind tool

After that, the good news is that there’s no paperwork required to have coverage.  If you are at an FDIC-insured bank and you have the type of account that’s covered (see below) and it doesn’t exceed $250,000, you’re automatically protected. If your account rises above it, then the excess would not be insured should there be a bank failure. So, if you have interest-bearing accounts that are near the limit, you should keep an eye on them to ensure any accumulating interest doesn’t push them over the limit.

But the FDIC makes sure that banks do more than protect your deposits. It also ensures financial institutions comply with consumer protection laws, such as the Fair Credit Reporting Act, Fair Credit Billing Act, Truth in Lending Act, and the Fair Debt Collection Practices Act, to give a few examples. Each of these gives you specific rights, such as protection from unfair billing practices and the right to view your credit report and have complaints addressed. 

The FDIC also takes a stand for rights by ensuring banks comply with the Community Reinvestment Act, which requires banks to help meet the credit needs of the communities they serve.

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What FDIC Insurance Covers

FDIC insurance covers a wide variety of banking products that consumers might have. These include:

  • Checking accounts
  • Savings accounts
  • Joint accounts
  • IRAs
  • Employee benefit plans
  • Money market accounts
  • Revocable and irrevocable trusts

In general, standard coverage is $250,000 for each account. To find out more about the specific considerations, the FDIC has a handy tool with details for each of these types of accounts.

What FDIC Insurance Doesn’t Cover

But FDIC insurance doesn’t cover every type of financial product; for example, it won’t cover an account of any size that is held in common savings vehicles like stocks, bonds, mutual funds, or annuities. It also won’t cover life insurance policies.

Filing A Claim With The FDIC

Have a compliant that the FDIC should take a look at? Fortunately, they have very specific directions on their website on how to file a complaint in writing or via web form.

To find out where to send your complaint via mail, call the FDIC at 1-877-ASK-FDIC to find out your bank’s regulator and corresponding contact information. Or you can file a complaint online by making an account at the FDIC Information and Support Center.

You’ll want to include details like:

  • The nature of your complaint or question
  • Name and address of your bank
  • Copies of related documents, including written permission from the account owner, if that isn’t you
  • Information on how you would like your complaint resolved
  • Full contact information for the depositor

Use the number above to contact a customer service associate for any remaining questions you have about the timeline or other details unique to your situation.

The Bottom Line

It feels good to know your hard-earned money has FDIC deposit insurance, but as a smart consumer, it’s wise to double-check that your accounts are the right type and right size, and that they are held with the right institution to enjoy that assurance. 

Want to know more about how to manage your finances? Check out our library of helpful Personal Finance articles on Rocket HQSM.

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Rocket Mortgage® lets you get to house hunting sooner.

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    Cathie Ericson

    Cathie Ericson writes about personal finance, real estate, small business, education, retail/ecommerce and other topics for a host of brands and websites. Her work has been featured on major media websites, including U.S. News & World Report, Forbes, Business Insider, The Oregonian, Industry Dive, Boston Globe, CNBC, MSN.com, Realtor.com and Yahoo Finance, among many others. Find her @CathieEricson.com.