How to Maximize Access to FDIC Insurance for Business Accounts

For more than 90 years, the Federal Deposit Insurance Corporation, or FDIC, has been safeguarding depositors. While the independent government agency is well-known for insuring consumer accounts, its protection also extends to business accounts.

This insurance covers up to $250,000 per account holder, per insurable capacity, at a single FDIC-member bank, but there are ways to easily access additional FDIC insurance. Here are four strategies for organizations to consider.

How FDIC insurance works

Bank failures are exceedingly rare, but when they have occurred, the FDIC has always stepped up to meet its obligations. As a result, not a single penny of FDIC-insured deposits has been lost since the agency's inception.

When an FDIC-insured bank fails, the most likely outcome is that a healthy institution acquires the deposits. If the FDIC can't arrange for another institution to assume the deposits, the bank goes into receivership and the FDIC is obligated to pay claims as soon as possible. The FDIC will not provide new business accounts.

It's important to remember that not all banks are FDIC-insured—use the FDIC's BankFind Suite tool to determine whether your bank is a member.

FDIC insurance limits for business accounts

When you deposit money with an FDIC-member bank, your funds are automatically insured for up to $250,000. However, your total insured coverage per insurable capacity at a single bank can't exceed the cap. For example, if your business has $350,000 spread across multiple business accounts at that bank, FDIC insurance will still only cover $250,000. While the agency has waived this limit in the past, it's not obligated to do so.

What accounts are eligible for FDIC insurance?

Business accounts that are eligible for FDIC insurance include checking, savings, money market and certificates of deposit, or CDs. Notably, FDIC insurance doesn't cover investments such as stocks, bonds, mutual funds, life insurance policies, annuities and Treasury securities—even if these investments were purchased from an insured bank.

The FDIC's electronic deposit insurance estimator, or EDIE, can help you calculate your total coverage across multiple accounts at insured banks. EDIE will show you what's insured and what portion—if any—exceeds coverage limits for that bank.

Ways to maximize FDIC insurance coverage

Businesses with deposit accounts that exceed the FDIC's $250,000 threshold might consider extra safeguards to manage risk. These four practical strategies may be used to help maximize FDIC business account coverage.

1 Diversifying account ownership categories

The FDIC insures deposits based on several distinct account ownership categories, including joint, individual, business and retirement accounts. Business owners may increase coverage by diversifying accounts across categories.

For example, a business owned by two co-founders may establish non-business joint accounts totaling $500,000 in deposits, or $250,000 in deposits for a business account. This full amount would be covered, provided their ownership stakes are equal to one another and that neither account holder has any named beneficiaries. A business owner who forms a corporation or LLC would also double their potential coverage because the legally distinct entity may hold a separate bank account from the individual.

2 Spreading deposits across several banks

Another way to potentially maximize FDIC insurance coverage is to open business accounts at multiple FDIC-insured banks. The funds in each of these banks will then be independently insured for up to $250,000 per insurable capacity. Once you divide your assets, you may move excess funds above the $250,000 cap across institutions, assuming they each offer electronic funds transfers.

This option may not be optimal for larger organizations that require substantial capital to cover routine payroll, operational and inventory expenditures. Instead, large commercial enterprises might consider using solutions specifically designed to access FDIC insurance coverage while working with one bank such as ICS®, the IntraFi Cash Service® and CDARS®, the Certificate of Deposit Account Registry Service®.

3 Leveraging CDARS®, the Certificate of Deposit Account Registry Service®

Organizations hoping to maximize FDIC coverage for their business cash reserves might consider investing in CDs through CDARS.

To invest, simply open an account at an FDIC-member bank that offers CDARS. Your funds will be distributed among multiple CDs across participating banks in the IntraFi network—ensuring that all investments remain below the $250,000 limit for FDIC coverage. With CDARS, you'll also lock in a uniform interest rate and receive consolidated statements for your business, which may simplify accounting and investment management.

4 Tapping into ICS®, the IntraFi Cash Service®

Like CDARS, ICS offers access to multi-million-dollar FDIC coverage, but for demand deposit or money market deposit accounts. Again, you'll make a single deposit with a participating FDIC-member bank, and your funds will be distributed among multiple participating banks—ensuring that no single institution carries more than the $250,000 maximum.

Having your funds placed through ICS may offer a few distinct advantages. Namely, they're typically interest-bearing accounts that permit depositors to request a withdrawal on any business day. The IntraFi network offers the ease and simplicity of having a single point of contact with the original bank.

The bottom line

Commercial enterprises with substantial assets may be able to access FDIC protection in amounts more than $250,000—potentially covering millions of dollars in assets. But to maximize coverage for your business, you'll need to think strategically about the banks and business accounts you choose. A business banker at an FDIC-member institution can help you explore which strategies may work best for your organization.