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FDIC insurance protects your money (except when ...)

A few years ago, you probably never gave the FDIC, or the deposit insurance it provides, a second thought. But with banks falling like dominoes and struggling financial institutions of all stripes in the news, you're probably wondering if there are exceptions to the FDIC's $100,000 guarantee.

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It is almost always there for you. But understanding FDIC rules is worth the effort, because almost is the operative word here.

Uncle Sam practices prevention
The Federal Deposit Insurance Corp. was created in 1933 by President Franklin D. Roosevelt to insure bank and thrift deposits after people lost their money in the aftermath of the stock market crash of 1929. Deposits at credit unions are insured by the National Credit Union Administration. The agencies insure accounts up to $100,000.

"The lessons of the Depression prompted the government to act quickly to protect bank customers from disasters beyond their control," says Kathleen Nagle, associate director for consumer protection at the FDIC.

But a government's work is never done. People were confused about coverage limits on joint accounts -- which seemed to be half of those on individual accounts -- and frequently complained to the FDIC. So in 1999, the FDIC ruled that all cash in a joint account is insured on a per-person basis, up to $100,000 each. So if Joe and Jane Depositor have $200,000 in a joint checking account, the total insurance coverage is $200,000.

To insure any more, the Depositors would have to find a new bank for the overflow.

Go to's Safe & Sound star ratings to check out the safety ratings on your bank.

Rules for CDs when banks merge
The rules for certificates of deposit depend on the maturity and term at the time of the merger:

  • CDs assumed by another institution continue to be separately insured until the earliest maturity date after the end of the six-month period.
  • CDs that mature during the six-month period and are renewed for the same term and in the same dollar amount (either with or without accrued interest) will continue to be separately insured until the first maturity date after the six-month period.
  • CDs that mature during the six-month period and are renewed on any other basis, or that are not renewed and cashed in, will be separately insured only until the end of the six-month period.
FDIC coverage
What is insured by the FDIC?
Savings deposits.
Checking deposits.
Deposits in NOW accounts.
Christmas club accounts.
Certificates of deposit.
Cashiers' checks.
Officers' checks.
Expense checks.
Loan disbursement checks.
Interest checks.
Outstanding drafts.
Negotiable instruments and money orders drawn on the institution.
Certified checks, letters of credit and travelers' checks, for which an insured depository institution is primarily liable, also are insured when issued in exchange for money or its equivalent, or for a charge against a deposit account.
What is not insured by the FDIC?
Contents in a safe-deposit box.
Money market mutual funds.
Treasury securities.
Any investment product whether purchased through a bank or a broker/dealer.

Some states require that all institutions that accept deposits carry federal deposit insurance. All federally insured banks and savings and loans must prominently display the FDIC seal.

The agency insures the principal and balance on deposit accounts -- such as checking, savings and money market accounts -- up to $100,000. Certificates of deposit and trust accounts that contain cash rather than securities are also protected.

So if Joe Account Holder had a principal balance of $95,000 in his checking or money market account plus $4,000 in interest, the total amount would be insured by the agency. If Joe's cash including interest exceeded $100,000 and his bank failed, he would only have the maximum insurance coverage of $100,000.

Next: "But what about retirement accounts? Are they protected?"
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