FDIC Insurance - Stock Trading Terms

FDIC insurance stands for Federal Deposit Insurance Corporation insurance, which is a type of protection offered to depositors in the United States. The FDIC is a government agency that was established in 1933 in response to the banking crisis during the Great Depression.

FDIC insurance provides depositors with protection against the loss of their deposits if their bank or savings institution fails. It covers deposits in checking accounts, savings accounts, money market accounts, and certificates of deposit (CDs) up to a certain amount per depositor, per insured bank.

As of 2023, the FDIC insurance coverage limit is $250,000 per depositor, per insured bank. This means that if you have multiple accounts at the same bank, the total of all your accounts is insured up to $250,000. If you have accounts at different banks, each bank is insured separately up to the same limit.

The FDIC insurance rules for individual and joint accounts are different, so it's important to understand these rules to ensure that your deposits are fully insured.

For individual accounts, the FDIC provides up to $250,000 in insurance coverage per depositor, per insured bank. This means that if you have an individual account at a bank, all the funds in that account are insured up to $250,000. If you have multiple individual accounts at the same bank, each account is insured separately up to $250,000.

For joint accounts, the FDIC provides up to $250,000 in insurance coverage per co-owner, per insured bank. This means that if you have a joint account with one other person, the FDIC will insure each co-owner's share of the account up to $250,000. If you have a joint account with more than one other person, the FDIC will assume that each co-owner has an equal share of the account, unless the account records indicate otherwise. If you have multiple joint accounts with the same co-owners at the same bank, the total of all the joint accounts is insured up to $250,000 per co-owner, per insured bank.

It's also important to note that there are certain types of accounts that are eligible for additional FDIC insurance coverage beyond the standard $250,000 limit. These include:

Retirement accounts: Certain retirement accounts, such as individual retirement accounts (IRAs), are eligible for up to $250,000 in additional FDIC insurance coverage.

Trust accounts: Certain types of trust accounts, such as revocable trust accounts, are eligible for up to $250,000 in FDIC insurance coverage per beneficiary.

Business accounts: Certain business accounts, such as corporation, partnership, and unincorporated association accounts, are eligible for up to $250,000 in FDIC insurance coverage per owner.

When it comes to FDIC insurance coverage for joint accounts, the coverage is determined based on the number of account owners and the type of ownership. The FDIC provides up to $250,000 of coverage per depositor, per insured bank, and this coverage is separate from any individual accounts that the account owners may have at the same bank.

Here's how FDIC insurance coverage works for different types of joint accounts:

Joint accounts with equal ownership: If all account owners have an equal ownership interest in the account, each owner's share of the account is insured up to $250,000. For example, if two people own a joint account with $500,000 in it, each person's share of the account would be insured up to $250,000, for a total of $500,000 in FDIC insurance coverage.

Joint accounts with unequal ownership: If the account owners have unequal ownership interests in the account, the FDIC will assume that each owner's share of the account is equal unless the account records indicate otherwise. For example, if two people own a joint account with $500,000 in it, but one person owns 75% of the account and the other owns 25%, the FDIC would assume that each person owns 50% of the account and would insure each person's share up to $250,000.

POD (payable on death) accounts: A POD account is a type of joint account that includes a designated beneficiary who will inherit the funds in the account when the account owner(s) pass away. The FDIC provides separate coverage for each beneficiary up to $250,000 per beneficiary. For example, if a husband and wife have a joint account with $500,000 in it and name their two children as equal beneficiaries, each child would be insured up to $250,000 for a total of $500,000 in FDIC insurance coverage.

It's important to note that if you have multiple joint accounts at the same bank with the same co-owners, the total of all the joint accounts is insured up to $250,000 per owner, per bank. So if two people have two joint accounts with $500,000 in each account at the same bank, their total coverage would be $500,000 (the total of both accounts) divided by two (the number of account owners), for a total of $250,000 in FDIC insurance coverage per owner.

FDIC insurance is funded through premiums paid by insured banks and savings institutions. This means that the insurance is free for depositors and does not require any action on their part. It is automatically provided to anyone who opens an account at an FDIC-insured bank or savings institution.

Overall, FDIC insurance is an important safeguard for depositors, providing peace of mind that their hard-earned money is protected in the event of a bank failure.