As consumers continue to be rattled by a seemingly bottomless pit of bad financial news, they’re looking for ways to ensure their entire bank deposits are covered by the Federal Deposit Insurance Corporation.

It’s not difficult to exceed the $250,000 limit on individual accounts, or the $250,000 limit on certain retirement accounts. (In October 2008, the FDIC insurance limit was raised to $250,000 from $100,000, effective until Dec. 31, 2009. This change has since been extended to Dec. 31, 2013. The limit may revert to $100,000 after that time.) In fact, the FDIC says that less than 62 percent of the $6.88 trillion on deposit in FDIC-insured banks was covered at the end of 2007. That leaves more than $2.5 trillion unprotected in the event of bank failures.

Fortunately, there are many ways you can have excess deposits covered, and you should take the trouble to use one of these methods or, through your own research, find other ways. Uninsured depositors receive an average of $0.72 on the dollar when their bank fails. Imagine having excess money in a bank and losing more than a quarter of it. In addition, it can take years for the FDIC to settle a bank failure.

The six examples of excess deposit coverage that we’ll highlight here primarily involve accounts at community or state-chartered banks. Some larger institutions carry their own excess deposit insurance, so if you prefer banking at larger institutions, ask if they have it. Companies such as BancInsure and Progressive Casualty Insurance provide excess deposit insurance to financial institutions. Excess share insurance is available to credit unions. But don’t assume you’re covered; always ask.

6 ways to cover deposits
  • Depositors Insurance Fund
  • IDC Deposits
  • Wintrust Financial
  • Brokerage accounts
  • FDIC

Depositors Insurance Fund (DIF)

Believe it or not, back in the 1930s Massachusetts state-chartered savings banks and state-chartered cooperative banks were prohibited from belonging to the FDIC. Instead, they were required to belong to the DIF, which functioned back then under a different name. Over time, the state legislature allowed the state-chartered institutions to also have FDIC insurance. The DIF then became the insurer of excess deposits. Any amounts above FDIC coverage are guaranteed. There are no forms to fill out, and no separate titling of accounts is necessary. The DIF program covers 68 state-chartered savings banks.

The Share Insurance Fund (SIF) provides the same coverage for state-chartered cooperative banks.

If you don’t live in Massachusetts, you’re not left out: Many of these banks allow out-of-state accounts. 

“The insurance is unlimited, but we don’t have $10 million customers,” says David Elliott, CEO at Depositors Insurance Fund in Woburn, Mass. “When we look at our profile, it’s an amount slightly above the FDIC limit. The customer, whose account started with $90,000 and through interest is up to $125,000, may not even be aware of the fact that the FDIC is insuring the first $250,000 and we’re insuring the $25,000 above that.”

Certificate of Deposit Account Registry Service (CDARS)

If you like the safety and convenience of CDs and you’re nearing the FDIC limit, you may want to consider the CDARS program if your bank offers it.

Funds above $250,000 are deposited in CDs at other banks in the network. The system is supposed to ensure the money is divided among non-related banks, but you should check to be certain. If you’re wealthy enough, you can insure up to $50 million.

The demand for the CDARS program has grown considerably this summer, according to Mark Jacobsen, president of Promontory Interfinancial Network, the company that created CDARS.

“Since mid-July, we’ve been doing about twice the business each week as we did in a typical week in January; and about three times the transaction volume we were doing a year ago. Our business in California has skyrocketed. It took us about five-and-a half-years to garner approximately 150 bank charters in California as member of our network. In the 11 days after IndyMac failed, we had requests from 40 different banks.”

IDC Deposits

Just as the CDARS program divvies your excess funds among CDs at different banks, IDC Deposits does the same with money market accounts. Its network consists of over 250 banks, allowing individuals to have FDIC coverage for up to $5 million in what’s called a MMAX account.

Another way MMAX is similar to CDARS is that the interest rate you earn may not be as good as you would get shopping around and placing your funds in various institutions yourself. But there’s a huge convenience factor to consider. With both programs you receive one statement and one 1099 for tax records.

For example, IDC currently pays banks 2 percent on deposits. The bank you do business with may give you an interest rate of 1.75 percent. That’s apparently not stopping people from going with the program.

“We are absolutely seeing an increase in business,” says IDC Deposits president Kim Weeks. “I’ll be the first to tell you that six months ago, four months ago, it was a tougher sell on the investor side because these are not great rates and we understand this. But because of everything going on right now, there’s a trade-off in the convenience and the assurance that the money is insured.”

Wintrust Financial

This is an example of a small group of banks that provide excess coverage. Wintrust is a bank holding company that has 15 separately chartered banks in the Chicago and Milwaukee areas. Wintrust makes its MaxSafe account available to customers of the 15 banks. It allows individuals to insure $1.5 million in CD and money market accounts — more than $16 million if you’re able to title accounts differently.

People from outside the Chicago and Milwaukee can apply for an account at one of the banks, but Wintrust is being cautious for varying reasons, says CEO Edward Wehmer.

“We did a one-week test in Tennessee and Kansas City and it was surprising the number of calls we had. Eventually, there will be online (applications), but we want to be very careful regarding the ‘know your customer’ rules on the online side of the business, especially with a money market account. Also, we don’t have funding needs. This has been a defensive product for us. I’m afraid that if I offer it, I could get $1 billion in deposits and nowhere to go with it.”

Brokerage accounts

If you have an account with an institutions such as Fidelity or Schwab, you can buy CDs at different banks from across the country with the click of a mouse. In addition to the convenience of one-stop shopping, you’ll often find yields above the national averages. Be aware that you’re responsible for making sure your money is divided among non-related banks. For more information on brokered deposits, read this article.


The FDIC allows you to insure significantly more than $250,000 if you’re able to title accounts separately. For instance, you could have $250,000 covered in an individual account, $250,000 covered in a joint account, and $250,000 in a retirement account. For more information on titling see this article.

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