Protecting Your Money: Understanding FDIC and SPIC Insurance Programs

In light of this year’s bank failures, it’s important to understand how to safeguard your funds. At Yeo & Yeo, we prioritize your financial security and want to ensure you have a clear understanding of how you can protect your money under the FDIC or SPIC insurance programs. Here are some essential guidelines and strategies to maximize these coverage limits.

The FDIC (Federal Deposit Insurance Corporation) is an independent agency of the United States government that safeguards bank depositors against losses if an FDIC-insured depository institution fails. Established in 1933 and backed by the full faith and credit of the United States government, the FDIC offers crucial protection. Under this program, your deposits are insured up to $250,000 per depositor, per FDIC-insured bank, and ownership category. Understanding the rules surrounding ownership categories is key to maximizing your coverage.

These ownership categories include single accounts, joint accounts, trust accounts, business accounts, certain retirement and employee benefit accounts, and government accounts. For instance, a married couple can leverage this rule to potentially have FDIC coverage of up to $1 million at one financial institution by maintaining multiple accounts titled correctly. Each spouse can have an account in their name, providing $250,000 coverage for both accounts and totaling $500,000 in coverage. Additionally, the couple can open a joint account at the same bank, granting them an extra $500,000 of insurance coverage, as each owner is entitled to their own $250,000 limit. It’s important to note that if a single owner has a checking account, savings account, and a CD in the same bank, the total coverage would be limited to $250,000 since the depositor, bank, and ownership categories are identical.

The National Credit Union Administration (NCUA) is the independent agency that administers the National Credit Union Share Insurance Fund (NCUSIF), offering protection for deposits in credit unions similar to the FDIC’s coverage for banks. While the $250,000 limit and rules remain largely the same, the NCUA covers a wide range of accounts at credit unions.

Remember that none of the accounts should have named beneficiaries in the scenario provided. Designating beneficiaries would classify the account as a revocable trust for insurance coverage purposes, potentially altering the insurance limits depending on how the account is titled and the number of beneficiaries named.

The FDIC insures various deposit products, including:

• Checking accounts
• Savings accounts
• Money market deposit accounts
• Certificates of deposit (CDs)

It’s crucial to note that the following products are not insured by the FDIC, even if they were acquired from an insured bank:

• Stock and bond investments
• Mutual funds
• Crypto assets
• Annuities and life insurance products
• Municipal Securities
• U.S. Treasury bills, notes, or bonds (though the full faith and credit of the U.S. government backs them)
• Safe deposit boxes and their contents

To provide further peace of mind, you should know that you don’t need to apply for or purchase FDIC or NCUA insurance. Coverage is automatic when you open a deposit account at an FDIC-insured bank or an NCUA-covered credit union.

In addition to FDIC and NCUA coverage, the Securities Investor Protection Corporation (SIPC) is a non-government entity that replaces missing stock and other securities in customer accounts held by its members, up to $500,000, including up to $250,000 in cash, in case of a member brokerage or bank brokerage subsidiary failure. However, note that SIPC insurance does not protect against the loss in value of a given investment.

To determine your coverage on a per-bank basis and assess the insured amount of your deposits, you can utilize the FDIC’s Electronic Deposit Insurance Estimator (EDIE), available online. By entering your current account information, you can obtain a comprehensive report outlining your coverage amount and how it is calculated.

For more detailed information, we recommend visiting the FDIC website at www.fdic.gov. If you would like to discuss your personal situation further or have any concerns, please reach out to your dedicated Yeo & Yeo advisor.