FDIC-Insured Account

An FDIC-insured account is a deposit account at a bank or thrift that is protected by the Federal Deposit Insurance Corporation (FDIC). If an FDIC-member institution fails, the FDIC reimburses depositors up to the insurance limits, providing protection against bank failures.

Key takeaways

• FDIC insurance protects deposits up to $250,000 per depositor, per insured bank, per ownership category.
• Common covered accounts: checking, savings, money market deposit accounts, negotiable orders of withdrawal (NOW), and certificates of deposit (CDs).
• Some accounts and assets are not covered, including brokerage investments, mutual funds, life insurance policies, and contents of safe-deposit boxes.
• You can verify a bank’s FDIC membership at FDIC.gov.

How FDIC insurance works

Banks use deposits to make loans (fractional reserve banking), retaining only a fraction of deposits as reserves. If too many depositors demand withdrawals at once (a bank run), a bank can fail. When a participating bank is declared failed, the FDIC steps in, assumes the institution, sells assets, and repays depositors up to insured limits—usually promptly for insured amounts. Amounts above the insured limit may be repaid later from asset recovery.

Coverage details and ownership categories

• Standard limit: $250,000 per depositor, per insured bank, per ownership category.
• Ownership categories include single (individual) accounts, joint accounts, certain trust accounts, and retirement accounts (e.g., IRAs).
• Joint accounts: each co-owner is typically insured up to $250,000 for their share.
• Revocable trust and certain retirement accounts receive separate treatment that can increase coverage depending on beneficiaries and account structure.
• Different banks: coverage limits apply separately at each FDIC-insured bank, so spreading funds across institutions increases insured coverage.

Accounts and assets covered vs. not covered

Covered (examples)
* Checking accounts
* Savings accounts
* Money market deposit accounts (bank-held)
* NOW accounts
* Certificates of deposit (CDs)
* IRAs and certain trust accounts (subject to rules)

Not covered (examples)
* Stocks, bonds, and mutual funds (even if purchased at a bank)
* Life insurance policies and annuities
* Municipal securities
* Safe-deposit box contents
* Cryptocurrencies
* Most investment products and brokerage accounts
* U.S. Treasury securities and similar marketable securities are not FDIC-insured if held as investments rather than deposit products

Practical examples

• A single depositor with $300,000 at one FDIC bank would have $250,000 insured and $50,000 uninsured.
• A couple with a joint account holding $500,000 could be fully insured if each co-owner’s share is $250,000.
• Holding $200,000 at Bank A and $150,000 at Bank B (both FDIC-insured) means all $350,000 is covered because each bank’s limits apply separately.

History and funding

The FDIC was created by the Banking Act of 1933 to restore confidence after widespread bank failures during the Great Depression. The standard insurance limit was raised to $250,000 in 2008. FDIC insurance is funded by premiums paid by member banks into the Deposit Insurance Fund (DIF). The FDIC also has statutory borrowing authority from the Treasury to address shortfalls.

Advantages and limitations

Advantages
* Protects depositors’ funds up to insured limits.
* Has prevented deposit losses for insured amounts since 1934, reducing the risk of banking panics.
* Enables savers to focus on choosing competitive deposit products at insured institutions.

Limitations and criticisms
* Coverage applies only to deposits, not investments.
* Depositors must understand ownership categories and limits to ensure full protection.
* Critics argue deposit insurance can create moral hazard by reducing market discipline on banks and depositors.

Practical advice

• Verify FDIC membership for any bank where you hold deposits.
• To insure amounts above $250,000, spread funds across multiple FDIC-insured banks or use different ownership categories where appropriate.
• Review account ownership and beneficiary designations (especially for trusts and IRAs) to maximize coverage.
• Keep investment assets that are not FDIC-insured in appropriate, diversified investment accounts and be aware of the differences in risk.

What the FDIC doesn’t insure — three key examples

1. Stocks and equity investments
2. Bonds and bond funds (including many mutual funds)
3. Mutual funds and other investment products offered by brokerages

Bottom line

FDIC insurance offers reliable protection for deposit accounts up to defined limits and has been a core feature of U.S. banking stability for decades. Understanding coverage rules, verifying a bank’s membership, and structuring accounts thoughtfully will help you maximize protection for your deposits.