Clearly Speaking

Guaranteeing the stability of the U.S. banking system



Bank deposits are protected by the Federal Deposit Insurance Corporation (FDIC), an independent agency backed by the full faith and credit of the U.S. government. Established in 1933 after the United States experienced a wave of bank failures, FDIC insurance is intended to reassure depositors and offer protection in case a bank becomes insolvent, is liquidated, or experiences other financial difficulties.

What qualifies for FDIC insurance?

Both federally-chartered and state-chartered banks and savings institutions qualify for FDIC insurance (FDICinsured institutions are required to post an official notice of that fact at each teller window). The FDIC insures both demand deposits (those that provide immediate access to cash, such as checking, NOW, and savings accounts as well as money market deposit accounts), and time deposits, such as certificates of deposit (CDs). It covers both principal and any interest accrued as of the date that an insured bank closes. It does not cover money market mutual funds, stocks, bonds, mutual funds, life insurance policies, annuities, or municipal or other securities, even if they were bought through an FDIC-insured bank. It also does not cover U.S. Treasury securities, though these are backed separately by the full faith and credit of the U.S. Treasury. Finally, the FDIC does not insure safe deposit boxes; in the event of a bank failure, the FDIC would typically arrange for transfer of the boxes to an acquiring bank, or send you a notice telling you how to retrieve the contents.

Tip: It’s important to understand the difference between a money market deposit account (sometimes known as an MMA), and a money market mutual fund, both of which may invest in similar shortterm debt instruments. A money market account, which earns interest and typically limits the number of monthly checks and/or transactions, is FDIC insured. A money market mutual fund, even one sold through a bank, is not FDIC insured, though a fund’s management typically will go to great lengths to avoid allowing the fund’s share price to drop below $1. Before investing in a mutual fund, obtain and read its prospectus (available from the fund) to get information about its investment objectives, risks, fees, and expenses, and consider them carefully before investing.

How much is insured?

Your coverage at an individual bank depends on how the money is held. The most commonly quoted coverage amount is a maximum of $100,000 per depositor per insured bank. However, depending on how your accounts are owned, you may qualify for a larger amount of total coverage at a given institution. Accounts fall into one of several separate categories of ownership, and each category is insured separately.

Tip: In addition to FDIC insurance, your bank may have additional protection. For example, in some states, a statechartered savings bank must carry additional insurance to cover potential losses beyond the FDIC limits. Some banks also may participate in the Certificate of Deposit Account Registry Service (CDARS), which enables a bank to spread large CD deposits among multiple banks while keeping the amount at each one within FDIC coverage limits.

Simply having multiple accounts at one bank isn’t enough to give you additional protection; what’s important is what type of account each one is, and who legally owns it. An online calculator available at can help you estimate the total FDIC coverage on your deposit accounts. Insured banks are required to provide information about insurance coverage and its limits. Travis L. Dobbs, CFP, is the founder of ClearView Financial, which specializes in providing retirement and legacy planning. Mr. Dobbs is Blount County’s only Certified Financial Planner and a proud member of the Million Dollar Round Table. Investment Advisory Services and securities offered through ProEquities, Inc., a registered broker dealer, and member of NASD & SIPC.

This information is educational in nature and is being provided with the understanding that it is not intended to be interpreted as specific legal or tax advice. Individuals are encouraged to consult with a professional in regards to legal, tax, and/or investment issues.