Saving · October 18, 2023

How To Protect Money in the Bank: Maximizing Your FDIC Coverage

For most of us, the term FDIC coverage is nothing new. It's been around since the Great Depression, when the federal government established the Federal Deposit Insurance Corporation to insure a portion of bank savings against loss.

While many consumers today don't give it much thought, FDIC insurance limits are becoming more important as interest rates continue to rise and consumers look more toward bank-based saving options. Zach Kelly and Brandon Johnson, Premier Relationship Bankers with First Citizens Bank, shed light on these limits and what they mean for consumers—especially those with large deposit portfolios.


What does FDIC insured mean?

When something is FDIC insured, it means you're protected against any losses of your insured deposits, up to certain limits, if a bank ceases operations. Many types of bank deposits are insured by the FDIC, including checking accounts, savings accounts, money market deposit accounts and certificates of deposit, or CDs.

However, there's an important qualification regarding the amount in an account. According to the FDIC, deposits are insured up to $250,000 per depositor, per FDIC-insured bank, per ownership category. So for those with less than $250,000 deposited in an FDIC-insured institution, the insurance is automatically assigned to their accounts.

The rules get a little more complex when you have more than $250,000 deposited in an FDIC-insured bank, but there are ways to stay protected—including using account titles to maximize coverage, Kelly and Johnson note. Because the $250,000 coverage limit refers to individual accounts and depositors, each account that's titled differently can qualify for its own $250,000 coverage limit, and each depositor can qualify separately for $250,000 or more in coverage as long as their accounts are structured properly.

Johnson often uses an example of a married couple to explain the nuances of account titling. "Let's say a married woman wants to confirm that her and her husband's deposits with First Citizens are FDIC insured," he says. Their $375,000 is spread across a checking account, a savings account and a money market deposit account.

"If she has $250,000 in a savings account titled with her name, it's FDIC insured," Johnson adds. "If she wants to insure more in a savings account, she could open a new account with her husband's name on it, or she could open a new account and add a different beneficiary. If she added a joint owner to her savings account, FDIC insurance would cover up to $500,000."

He says this strategy can also be used when individuals have unexpected increases in available deposits. "Let's say her husband's mother passes away, and they have a windfall of cash that leads to $750,000 or more in their accounts," he says. "If we move funds into just one person's name or add a beneficiary, we can easily bolster that FDIC insurance number higher."

While simply adding beneficiaries to individual retirement accounts, or IRAs, doesn't increase their FDIC insurance coverage, one option Johnson and Kelly discuss with clients is establishing a revocable trust account. With this option, owners can insure up to $750,000 if they name three unique beneficiaries.

Table showing how married couples could maximize their FDIC coverage

According to the FDIC Electronic Deposit Insurance Estimator—and assuming all accounts are through an FDIC-insured bank—titling accounts can impact the total amount covered by FDIC insurance.

Individual accounts: Each spouse could be insured for $250,000.

Joint accounts: Both spouses could be insured for $500,000 for a joint checking account.

Retirement accounts: Each spouse could be insured for $250,000 in individual IRA accounts. Remember that deposits in bank IRAs can be FDIC insured. Other types of investments within IRAs aren't typically covered.

Revocable trusts: Deposits could be insured for $750,000 in a joint trust account with three unique beneficiaries.

The total balance and FDIC-insured amount for all accounts is $2,250,000.

Understand account qualifications

When titling and structuring your accounts, remember that the FDIC doesn't cover certain account types. Unprotected financial products include cryptocurrency, mutual funds, annuities, life insurance policies, exchange traded funds, or ETFs, stocks and bonds. Savings-based traditional or Roth retirement accounts like CD IRAs are FDIC insured, while investment-based IRAs typically aren't covered.

"Some customers have funds in checking accounts and savings accounts, and they also have a wealth relationship," Johnson says. "Different rules may apply to the wealth choices in their portfolio. For example, stock market investments aren't covered by FDIC insurance."

Kelly often refers to the FDIC's Electronic Deposit Insurance Estimator with clients to demonstrate the full scope of how he may be able to help bolster their coverage. "When people see it presented like that, they feel a lot more confident than just reading a blanketed sign that we're an FDIC-insured bank," he says.

Consider diversification

In addition to helping customers ensure their accounts are titled in accordance with their financial goals, Johnson and Kelly help ensure that the mix of accounts is the best choice for meeting their goals.

"When we sit down with our clients, we try to be inquisitive and understand their short-term and long-term plans for different accounts," Kelly says. "This way, we can provide guidance and options for how accounts are titled."

Right now, he says many customers' go-to account for fully liquid savings is a money market account.

"There's never been a time in my career where we've had this many conversations about moving funds into a money market savings account," he says. "But because of higher interest rates, it makes sense for a lot of people."

The information provided should not be considered as tax or legal advice. Please consult with your tax advisor.

Your investments in securities and insurance products and services are not insured by the FDIC or any other federal government agency and may lose value.  They are not deposits or other obligations of, or guaranteed by any bank or bank affiliate and are subject to investment risks, including possible loss of the principal amounts invested. There is no guarantee that a strategy will achieve its objective.

About the Entities, Brands and Services Offered: First Citizens Wealth™ (FCW) is a marketing brand of First Citizens BancShares, Inc., a bank holding company. The following affiliates of First Citizens BancShares are the entities through which FCW products are offered. Brokerage products and services are offered through First Citizens Investor Services, Inc. ("FCIS"), a registered broker-dealer, Member FINRA and SIPC. Advisory services are offered through FCIS, First Citizens Asset Management, Inc. and SVB Wealth LLC, all SEC registered investment advisors. Certain brokerage and advisory products and services may not be available from all investment professionals, in all jurisdictions or to all investors. Insurance products and services are offered through FCIS, a licensed insurance agency. Banking, lending, trust products and services, and certain insurance products and services are offered by First-Citizens Bank & Trust Company, Member FDIC, and an Equal Housing Lender, and SVB, a division of First-Citizens Bank & Trust Company. icon: sys-ehl

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