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 money back this week, even if their deposits were uninsured.
  • Treasury Secretary Janet Yellen said this week if other institutions fail in the future, customers may have to rely on FDIC insurance.
  • Most importantly, FDIC insurance has limits. Here’s how to make sure your funds are fully covered.

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

John Preacher | Washington Post | Getty Images

Account holders at failed Silicon Valley Bank and Signature Bank got a lucky break in recent days when emergency federal efforts ensured that billions in uninsured deposits were protected.

Treasury Secretary Janet Yellen said this week that the same may not be true the next time another bank fails.

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

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However, many of Silicon Valley Bank’s clients, which largely included venture capital firms, small tech firms, and entrepreneurs, had uninsured deposits at the time it failed. S&P Global Market Intelligence data from 2022 showed that 94% of SVB depositors were above the FDIC $250,000 limit.

These depositors, as well as those at Signature Bank, have been given a reprieve, as banking regulators have announced a plan to fully insure all deposits among other measures intended to help prevent sparking a larger financial emergency.

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

In the future, however, Yellen said, uninsured deposits would only be covered where “a failure to protect uninsured depositors would create systemic risk and significant economic and financial consequences.”

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

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

Experts say it’s time to make sure your deposits are protected.

The maximum FDIC coverage is $250,000 per depositor, per bank, in each account ownership class.

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

said Ted Jenkin, certified financial planner, CEO and founder oXYGen Finance, a financial advisory and wealth management firm headquartered in Atlanta. He is a member of the CNBC Financial Advisor Board.

The majority of Americans will be covered by FDIC insurance.

Ted Jenkin

CEO of oXYGen Financial

The amount insured depends on the name of the legal property, according to Jude Boudreaux, a CFP and senior financial planner at the Planning Center in New Orleans who is also a member of the Board of Financial Advisors for CNBC.

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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, Jenkin said, check your bank statement.

“If you’re going to a bank or putting your money anywhere,” Jenkin said, “the first question you want to ask is, ‘The money you’ve deposited now, is it FBI insured?'” “

You can also check out the FDIC’s Electronic Deposit Insurance Estimator To find out if your money is insured at your institution and if any part exceeds the coverage limits.

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

Lauren Justice | bloomberg | Getty Images

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

If you want additional coverage, you may also want to talk to your current bank, Boudreaux suggested. In some cases, they may work with other FDIC-insured institutions to obtain larger cash deposits that are protected and insured.

Small businesses may also want to explore the possibility of pursuing additional coverage through multiple banks.

Under FDIC coverage, you will be refunded dollar for dollar if your bank fails, plus any interest earned up to the date of default.

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

However, protection under the SIPC is limited and does not provide protection specifically if the value of your securities declines.

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