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FDIC insurance is a government-backed program that protects depositors’ funds in FDIC-insured banks, offering a safety net up to certain limits. With recent changes in coverage, it’s important to understand how FDIC insurance works, what’s covered, and the limits that apply.
What is FDIC Insurance?
FDIC insurance is a safeguard that protects depositors by insuring their deposits at FDIC-insured banks. As of April 1, 2024, the FDIC insures deposit accounts up to $250,000 per depositor, per insured bank, per ownership category. This insurance is funded by premiums paid by member banks, not taxpayers.
The FDIC insurance covers a variety of deposit accounts, including:
- Checking Accounts
- Savings Accounts
- Money Market Deposit Accounts (MMDAs)
- Certificates of Deposit (CDs)
If an FDIC-insured bank fails, the FDIC guarantees that depositors will be reimbursed for their insured deposits, up to the applicable limits.
Understanding the New Coverage Limits for Trust Accounts
Effective April 1, 2024, there are new rules for revocable and irrevocable trust accounts:
- Revocable and Irrevocable Trust Accounts: Under the new rules, each trust depositor’s interest at an insured bank is insured up to $250,000 per beneficiary. Importantly, the maximum coverage per owner, per insured bank, is now $1,250,000 (based on a maximum of five beneficiaries). This means that even if a trust account has more than five beneficiaries, the total insurance for the trust deposits at a single bank will not exceed $1,250,000 per owner.
For example, if a trust has three beneficiaries, the trust deposits would be insured up to $750,000 at one bank. If there are five or more beneficiaries, the insurance coverage is capped at $1,250,000 per owner per bank.
Accounts Not Covered by FDIC Insurance
While FDIC insurance offers broad protection for many deposit accounts, certain financial products are not covered. These include:
- Investment Products: Stocks, bonds, mutual funds, and other securities are not covered by FDIC insurance, even if purchased through an FDIC-insured bank.
- Annuities and Insurance Products: Products like annuities and life insurance policies are not considered deposits and therefore are not insured.
- Safe Deposit Boxes: The contents of safe deposit boxes are not covered by FDIC insurance, as the insurance applies only to deposits, not physical items.
- Crypto Assets: Cryptocurrencies and digital assets are not covered by FDIC insurance, regardless of where they are held.
Maximizing FDIC Insurance Coverage
Given the FDIC’s limits, it’s important to structure your accounts in a way that maximizes your coverage. Here are some strategies:
- Use Multiple Banks: If your total deposits exceed $250,000, consider spreading your funds across multiple FDIC-insured banks.
- Leverage Different Ownership Categories: You can increase your coverage by holding accounts in different ownership categories, such as individual, joint, and retirement accounts, each of which has separate $250,000 insurance coverage.
- Understand the Trust Account Limits: For trust accounts, be aware of the $1,250,000 maximum coverage per owner per bank and plan accordingly.
Overall Coverage Strategy
Understanding FDIC insurance and its limits is crucial for protecting your deposits. If your deposits exceed the standard insurance limits, consider the strategies above to maximize your coverage. At First National Bank of Oklahoma, our team is ready to help you navigate these options and ensure that your deposits are as secure as possible.
For more detailed information about FDIC insurance, you can visit the FDIC’s official website.
By staying informed and proactive, you can rest assured that your money is protected, no matter the economic conditions. If you have questions about your specific accounts or need assistance structuring your deposits for maximum coverage, our team at First National Bank of Oklahoma is here to help.