Things to know about FDIC coverage after SVB and signature bank failures
A man walks past the Silicon Valley Bank headquarters on March 10, 2023 in Santa Clara, California.
Liu Guanguan | Getty Images
Most consumers have FDIC coverage
The FDIC was formed in 1933 after thousands of bank failures. Since insurance began in 1934, no depositor has lost insured funds due to a bank failure. The independent government agency is financed by contributions from banks and savings banks.
The limit for FDIC coverage is $250,000 per depositor, per bank, and in each account holder category.
“The majority of Americans will be covered by FDIC insurance because most Americans have less than $250,000 in any given bank account,” said Ted Jenkin, a certified financial planner and CEO and founder of oXYGen Financial, an Atlanta-based financial advisory and wealth management firm. He is a member of CNBC’s Financial Advisor Council.
According to Jude Boudreaux, CFP and senior financial planner at the New Orleans Planning Center, who is also a member of CNBC’s Financial Advisor Council, the amount of insurance is based on the rightful owner’s name.
For example, a married couple with a business may have insured up to $250,000 in an account in the name of one spouse, up to $250,000 in an account in the other spouse’s name, and up to $250,000 in a business account.
How to Verify and Strengthen FDIC Coverage
If you want to know if your deposits are FDIC-insured, check your statement, Jenkin said.
“When you go to a bank or put your money anywhere, the first question you should ask is, ‘The money I’m putting in now, is it FDIC insured?'” Jenkin said.
The majority of Americans will be covered by FDIC insurance.
CEO of oXYGen Financial
You can also check the FDICs Electronic Deposit Insurance Estimator to see if your funds are insured with your institution and if any portion exceeds the coverage limits.
One way to increase your FDIC coverage is to open accounts with other banks, especially if you have more than $250,000 in deposits, Boudreaux said.
If you want additional coverage, you should also speak to your current bank, Boudreaux suggested. In some cases, they may work with other FDIC-insured entities to protect and insure larger cash deposits.
What FDIC insurance covers:
- Accounts with Negotiable Payout Order (NOW).
- Money Market Deposit Accounts (MMDAs)
- Term deposits such as certificates of deposit (CDs)
- Cashier’s checks, money orders, and other official items issued by a bank
What FDIC insurance does not cover:
- Lockers or their contents
- US Treasury bills, bonds or debentures (These investments are backed by the full trust and credit of the US government).
Other financial safety nets also provide protection
Treasury bills are also a strong option now as short term bills are currently yielding well and are backed by the full confidence and credit of the US government. “They’re as good as it gets from a safety standpoint,” said Boudreaux.
Not all accounts offer FDIC coverage, Jenkin noted. For example, a brokerage account opened with a financial advisor is likely to be covered by the Securities Investor Protection Corporation, or SIPC.
Under FDIC coverage, you’ll be reimbursed dollar for dollar if your bank defaults, plus any interest earned up to the date of default.
If something happens to your brokerage firm, you’re covered for up to $500,000 under SIPC, with a $250,000 cash limit.
However, protection under SIPC is limited and specifically offers no protection if your securities fall in value.
https://www.cnbc.com/2023/03/13/what-to-know-about-fdic-coverage-after-svb-signature-bank-failures.html Things to know about FDIC coverage after SVB and signature bank failures