FDIC Insurance – How it Works and Why it Matters

The Federal Deposit Insurance Corporation (FDIC) is an independent agency of the U.S. government. Created in 1933 during the Great Depression, the FDIC was founded to insure bank deposits in case the bank failed. As a whole, the FDIC was established to increase the public’s trust in the banking system.

When you tuck your money into a bank account, your funds do not just sit idle. Banks actually invest your money to earn revenue and FDIC insurance protects these investments on your behalf. FDIC coverage applies to deposit accounts, including checking accounts, savings accounts, money market deposit accounts, and Certificates of Deposit. Live Oak Bank has full FDIC coverage on all of our deposit products.

FDIC insurance covers up to $250,000 per depositor, per insured bank, for each account ownership category. You can be strategic about gaining additional covering by having qualifying accounts under different ownership categories.  If you open an account by yourself (single account), the coverage limit is $250,000 per owner.

However, if you open a joint account with two owners (example: you and your spouse), you will each be covered up to $250,000, which doubles your FDIC coverage. You can also open a revocable trust account with multiple beneficiaries who would receive the funds upon the account owner’s death. Each beneficiary is covered up to $250,000 with a maximum of five beneficiaries on a single account.

These examples above are simply to explain how FDIC coverage works and are not intended as financial planning advice – be sure to have a conversation with your own financial advisor. Did you know that you can get help with calculating your FDIC coverage? You can find out how much FDIC coverage you have by using the EDIE calculator found on the FDIC’s website.

It’s important to note that not all banks have FDIC insurance, so be sure to ask before you open a deposit account. Check to see if your bank has coverage on the FDIC’s website here.