FDIC Insurance

What FDIC insurance covers

FDIC insurance protects deposits at member banks if the bank fails. The standard coverage:

• $250,000 per depositor, per insured bank, per ownership category.

The "per ownership category" part is important — a depositor can have substantially more than $250K covered at a single bank by spreading across categories:

• Single accounts — owned by one person.
• Joint accounts — owned by two or more people; each owner gets $250K coverage.
• Retirement accounts (IRAs) — separately covered up to $250K.
• Trust accounts — coverage based on beneficiaries.
• Business accounts — covered separately from personal accounts at the same bank.

A married couple with joint and individual accounts can have $1M+ at a single bank fully insured.

What FDIC covers and doesn't

Covered:

• Checking accounts
• Savings accounts
• Money market accounts (deposit accounts at banks, not money-market mutual funds)
• Certificates of deposit (CDs)
• NOW accounts
• Cashier's checks and money orders issued by the bank

Not covered:

• Investments — stocks, bonds, mutual funds, ETFs (these are typically held at brokerages, with separate SIPC protection)
• Money-market mutual funds — even if held at a bank
• Annuities and life insurance — not deposit products
• Safe deposit box contents
• US Treasury securities — but these are obligations of the US government and don't need insurance
• Cryptocurrency — even on bank-affiliated platforms

When FDIC actually pays

When a bank fails, the FDIC steps in:

1. Closes the bank — usually on a Friday afternoon to minimize disruption.
2. Transfers deposits to another bank or pays out directly. Often the failed bank's deposits and branches reopen Monday under a new owner.
3. Insured deposits typically available within one business day. Uninsured amounts are paid through liquidation of the failed bank's assets, often at significant losses.

In practice, most depositors at failed banks have been made whole even when amounts exceeded the $250K limit. The 2023 Silicon Valley Bank failure resulted in full deposit guarantees for all depositors despite many having uninsured balances. This was extraordinary action; the standard $250K limit shouldn't be relied upon to be exceeded.

Bank failures in recent history

Some context:

• 2008-2010 — over 300 US bank failures during and after the financial crisis. Most depositors fully covered.
• 2023 — Silicon Valley Bank, Signature Bank, First Republic. The largest banking failures in history by total assets, occurring within weeks of each other.
• Ongoing baseline — even in normal years, several small US banks fail annually. The FDIC manages these without disruption.

The 2023 failures specifically tested the FDIC framework — the speed of digital bank runs, the uninsured-deposit problem, and the macroeconomic implications. Policy responses since (proposed deposit-insurance reforms, regulatory adjustments) are still working through.

SIPC: the brokerage equivalent

SIPC (Securities Investor Protection Corporation) covers brokerage accounts:

• Up to $500,000 per account, including up to $250,000 in cash.
• Covers fraud and brokerage failure but not investment losses.
• Many large brokerages add private insurance ("excess SIPC") that extends coverage well beyond limits.

SIPC is similar in concept to FDIC but covers different financial relationships. Mixing them up is a common source of confusion.

How to maximize coverage

For depositors approaching or exceeding the $250K limit:

• Spread across multiple banks. Each insured bank gets its own $250K limit per depositor per ownership category.
• Use multiple ownership categories at the same bank — joint accounts, retirement accounts, trust structures.
• Consider IntraFi (formerly CDARS/ICS). These services automatically distribute deposits across many member banks, providing FDIC coverage at scale through a single account relationship.
• Treasury bills — for amounts well above coverage limits, T-bills are arguably safer than insured bank deposits (direct US government obligation), often with comparable or better yields.

What FDIC doesn't solve

The FDIC framework has known limitations:

• Speed of bank runs — modern digital channels can produce extraordinarily fast withdrawals (SVB lost $42B in a single day). Existing playbooks struggle with this speed.
• Concentration of uninsured deposits. Tech-focused banks like SVB had unusually high concentrations of large uninsured deposits, creating systemic risk that the standard limit didn't address.
• Cross-border deposits — non-US depositors at US banks are covered but face jurisdictional complications.
• Crypto-on-chain-of-banks confusion. Stablecoins held at banks aren't FDIC-insured; the customer asset structure can be complex.

For most US depositors, FDIC insurance does what it says — protects modest deposits against bank failure. For larger or more complex situations, additional planning may be warranted.