Note: this is pulled from the FDIC website with my comments and observations interspersed.
An independent agency of the federal government, the FDIC was created in 1933 in response to the thousands of bank failures that occurred in the 1920s and early 1930s. Since the start of FDIC insurance on January 1, 1934, no depositor has lost a single cent of insured funds as a result of a failure.
Good News! You probably won’t lose your life savings unless some crazy event happens like a “greater depression.”
The FDIC receives no Congressional appropriations – it is funded by premiums that banks and thrift institutions pay for deposit insurance coverage and from earnings on investments in U.S. Treasury securities. The FDIC insures trillions of dollars of deposits in U.S. banks and thrifts – deposits in virtually every bank and thrift in the country.
The standard insurance amount is $250,000 per depositor, per insured bank, for each account ownership category. You’ve probably seen these little cards at banks.
The FDIC’s Electronic Deposit Insurance Estimatorcan help you determine if you have adequate deposit insurance for your accounts.
A Guide to What Is and Is Not Protected by FDIC Insurance
Banks have traditionally offered consumers deposit products, such as checking, savings and money market deposit accounts, and certificates of deposit (CD’s) for which each depositor is insured by the FDIC up to at least $250,000.
Yep. a quarter of a million dollars per person. Ten accounts? $250,000.00. One account? $250,000.00.
Increasingly, banks, along with investment firms, are also offering consumers a broad array of investment products that are not deposits, such as mutual funds, annuities, life insurance policies, stocks and bonds.
Unlike the traditional checking or savings account, however, these nondeposit investment products are not insured by the FDIC.
This guide will help you identify which bank products are protected by FDIC insurance, and those nondeposit investment products that are not FDIC-insured.
What Is Insured?
FDIC insurance covers all types of deposits received at an insured bank, including:
- checking accounts,
- negotiable order of withdrawal (NOW) accounts,
- savings accounts,
- money market deposit accounts (MMDAs),
- certificates of deposit (CD) and other time deposits, and
- official items issued by a bank (such as cashier’s checks or money orders).
FDIC insurance covers depositors’ accounts at each insured bank, dollar-for-dollar, including principal and any accrued interest through the date of the insured bank’s closing, up to the insurance limit. The standard insurance amount is $250,000 per person, per bank, per ownership category.
What Is Not Insured?
FDIC does not insure nondeposit investment products, even if they were purchased from an insured bank, including:
- annuities
- mutual funds
- stocks
- bonds
- government securities
- municipal securities
- U.S. Treasury securities
These products may be offered to you in the financial institution’s lobby, through the mail, over the phone or through the Internet. Most often, the people selling these products are not financial institution employees, but employees of third-party securities broker/dealers or insurance companies.
Sales representatives must make these disclosures to you orally and/ or in writing whenever they make a presentation, provide investment advice concerning a nondeposit investment product, or open an investment account for you.
Any advertisements and other promotional materials you receive also must disclose that the product is not a deposit, is not insured by FDIC, and is subject to investment risks.
Look for the logo disclosure (see below) in visual media such as television broadcasts, ATM screens, billboards, signs, posters, and in written advertisement and promotional materials such as brochures.
The Securities Investors Protection Corporation (SIPC), a non-government entity, replaces missing stocks and other securities in customer accounts held by its members up to $500,000, including up to $250,000 in cash, if a member brokerage or bank brokerage subsidiary fails.
For more information contact:
Securities Investor Protection Corporation
805 15th Street, NW Room 800
Washington, DC 20005-2215
Telephone: 202-371-8300
E-Mail: asksipc@sipc.org
www.SIPC.org
IMPORANT: SIPC insurance does not protect an investor against the loss in value of a given investment. So…probably don’t put all your hopes in stocks or cryptocurrency with the assumption that the SIPC will cover you.
Other situations not insured by the FDIC:
Safe Deposit Boxes – The contents of a safe deposit box are not insured by the FDIC. (Make sure you read the contract you signed with the bank when you rented the safe deposit box in the event that some other type of insurance is provided; some banks may make a very limited payment if the box or contents are damaged or destroyed, depending on the circumstances.) If you are concerned about the safety, or replacement, of items you have put in a safe deposit box, you may wish to consider purchasing fire and theft insurance. Usually such insurance is part of a homeowner’s or tenant’s insurance policy for a residence and its contents. Again, consult your insurance agent for more information.
In the event of a bank failure, in most cases an acquiring institution would take over the failed bank’s offices, including locations with safe deposit boxes. If no acquirer can be found the FDIC would send boxholders instructions for removing the contents of their boxes.
Robberies and Other Thefts – Stolen funds may be covered by what’s called a banker’s blanket bond, which is a multi-purpose insurance policy a bank purchases to protect itself from fire, flood, earthquake, robbery, defalcation, embezzlement and other causes of disappearing funds. In any event, an occurrence such as a fire or bank robbery may result in a loss to the bank but should not result in a loss to the bank’s customers.
Unauthorized access to your funds may be covered by the Electronic Funds Transfer Act and other consumer protections. If a third-party somehow gains access to your account and transacts business you did not authorize, you must contact the bank as soon as you notice the loss to learn about their procedures for protecting your rights.
How to File a Complaint
If you have a problem or a concern with a deposit or investment, try to resolve your complaint directly with an officer of the bank or firm before involving an outside agency. Financial institutions value their customers and most will be helpful. If you are unable to resolve the matter with the financial institution, use the following guidelines to determine where to direct your complaint.
If your complaint is against a salesperson who represents a third-party investment firm, call the number below for instructions on where to write:
The Financial Industry Regulatory Authority (www.finra.org)
(formerly the National Association of Securities Dealers)
(301) 590-6500
Basically, your funds are protected. Stay rational.
-B&T