Is my money safe? Here are the ins and outs of FDIC insurance

  • The federal government helped customers of Silicon Valley Bank and Signature Bank get their funds back this week, even though their deposits were uninsured.
  • If other institutions fail in the future, customers may have to rely on FDIC insurance, Treasury Secretary Janet Yellen said this week.
  • Importantly, FDIC insurance has limits. Here’s how to make sure your money is fully covered.

People wait for service outside Silicon Valley Bank in Menlo Park, California.

John Brecher | The Washington Post | Getty Images

Account holders at failed Silicon Valley Bank and Signature Bank have been lucky in recent days when emergency federal efforts ensured the protection of billions in uninsured deposits.

But it may not be the same the next time another bank fails, Treasury Secretary Janet Yellen said this week.

Depositors generally have up to $250,000 of coverage per bank, per category of account ownership through the Federal Deposit Insurance Corporation, or FDIC.

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However, many of Silicon Valley Bank’s customers, which largely included venture capitalists, small tech companies and entrepreneurs, had uninsured deposits at the time of its bankruptcy. S&P Global Market Intelligence data from 2022 showed that 94% of SVB depositors exceeded the $250,000 FDIC limit.

Those depositors, along with those at Signature Bank, were granted a reprieve as banking regulators announced a plan to fully insure all deposits, among other measures to help prevent the outbreak of a larger financial emergency.

“The American people and American businesses can be confident that their bank deposits will be there when they need them,” President Joe Biden said Monday.

Yellen said that going forward, however, uninsured deposits would only be covered if “the lack of protection for uninsured depositors creates systemic risk and significant economic and financial consequences.”

For many consumers, this week’s bank failures could bring back memories of the 2008 financial crisis.

Although experts say this time is different, there’s no guarantee another failure won’t happen again. Some other institutions also showed signs of stress this week. The First Republic received financial aid from other financial institutions to help curb its woes, while Credit Suisse also borrowed billions.

Experts say now is the time to make sure your deposits are protected.

The FDIC coverage limit is $250,000 per depositor, per bank, in each category of account ownership.

Since the independent government agency began providing cover in 1934, no depositor has lost insured funds due to bank failure. The FDIC is funded by premiums paid by banks and savings associations.

“The majority of Americans are going to be covered by FDIC insurance because most Americans have less than $250,000 in a specific bank account,” said Ted Jenkin, Certified Financial Planner and CEO and Founder of oXYGen Financial, a company financial advice and wealth management. based in Atlanta. He is a member of CNBC’s Financial Advisor Council.

The majority of Americans are going to be covered by FDIC insurance.

Ted Jenkins

CEO of oXYGen Financial

The amount of insurance is based on the property’s legal name, according to Jude Boudreaux, CFP and senior financial planner at the Planning Center in New Orleans, who is also a member of CNBC’s Financial Advisor Council.

For example, a married couple with a business may have up to $250,000 insured in an account in one spouse’s name, up to $250,000 insured in an account in the other spouse’s name, and up to $250,000 insured in a business account.

If you want to know if your deposits are FDIC-insured, check your bank statement, Jenkin said.

“If you go to a bank or put your money anywhere, that’s the first question you want to ask, ‘The money I’m depositing now, is it FDIC insured?'” Jenkin said.

You can also check the FDIC’s Electronic Deposit Insurance Estimator to see if your funds are insured at your institution and if any portion exceeds coverage limits.

Customers outside a branch of Silicon Valley Bank in Beverly Hills, California on March 13, 2023.

Lawrence Justice | Bloomberg | Getty Images

One way to increase your FDIC coverage is to open accounts at other banks, especially if you have more than $250,000 in deposits, Boudreaux said.

If you want additional coverage, you can also go to your current bank, Boudreaux suggested. In some cases, they may work with other FDIC-insured institutions to protect and insure larger cash deposits.

Small businesses may also want to explore the possibility of obtaining additional coverage from several banks.

Treasuries are also a solid option now, as Treasuries are currently performing well and are backed by the full confidence and credit of the US government. “They’re as good as they come from a safety standpoint,” Boudreaux said.

Not all accounts provide FDIC coverage, Jenkin noted. For example, a brokerage account opened with a financial advisor will likely be covered by the Securities Investor Protection Corporation, or SIPC.

Under FDIC coverage, you’ll be reimbursed dollar-for-dollar if your bank fails, plus interest earned up to the date of default.

Under SIPC, if something happens to your brokerage firm, you are covered for up to $500,000, with a cash limit of $250,000.

However, the protection offered by the SIPC is limited and in particular does not offer any protection if the value of your securities falls.

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