Understanding the FDIC insurance limit: safeguarding your deposits

If you have funds in a US bank, you want to know your money is safe. That’s where FDIC insurance comes in.

Money held in FDIC insured institutions is insured to a legal maximum limit, and protected in the unlikely event the bank runs into financial difficulties. But what is FDIC insurance, and what is the FDIC insurance limit for 2023? Read on.

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What is FDIC insurance?

FDIC stands for Federal Insurance Deposit Corporation¹. It’s an independent agency of the US government which provides deposit insurance protections to anyone holding funds in an eligible US institution, like a bank or savings association.

In the event that the bank you hold an eligible account with fails, FDIC deposit insurance means that your funds are insured up to the limit of the FDIC insured amount, and subject to a few terms and conditions — some of which we’ll explore here.

How does FDIC insurance limit work?

The FDIC insurance limit is reviewed and may be changed from time to time. The 2023 FDIC limit is 250,000 USD per depositor, per insured bank, for each account ownership category.

Any accounts you open or hold in an FDIC insured institution are automatically covered by this protection — there’s no need to pay extra and there’s no extra paperwork to fill in.

Can you increase your FDIC insurance limit?

The FDIC insurance limit is set by the government and the FDIC, and can not be increased. However it’s helpful to know that the insurance limit applies per eligible institution and ownership category.

That means, for example, that if you have an eligible account at one FDIC insured institution, it’ll be insured to the maximum amount — and if you then open another account at a different FDIC insured bank, that will also benefit from the same level of protections.

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Are all bank accounts FDIC insured?

It’s important to understand the types of accounts that FDIC insurance is designed to cover. Not all types of account or investment are FDIC insured.

However, many common account types are covered, as long as you’re with an FDIC insured bank or institution.

How can you confirm if your bank is FDIC insured?

As we’ve mentioned, FDIC insurance only applies to banks and institutions which are covered by the FDIC deposit insurance scheme.

Generally you’ll be able to see this clearly marked on the website of any bank you might open an account with — or, if you’d prefer to double check, FDIC has a very handy tool to look up by institution name: FDIC BankFind Suite.

How does FDIC insurance apply to joint accounts?

We covered the fact that FDIC insurance applied per depositor to a maximum amount, which is 250,000 USD at the time of writing. But what about FDIC deposit insurance and joint accounts?

If you have a joint account with one or more other people, where each of you have equal rights to make withdrawals and you’ve all signed the deposit account signature card (electronic signatures are fine), you’ll benefit from the full FDIC insurance allowance per depositor.

That means that if 2 of you have a joint account your insurance under the current limit is 500,000 USD.

Accounts and investments not covered by FDIC

So which account and investment types do not benefit from FDIC insurance then?

FDIC insurance covers deposit accounts. Investments that are not deposits are not covered by FDIC. That means that investments like the following are not insured by the FDIC, even if you hold them at an eligible FDIC institution:

• Mutual funds
• Annuities
• Life insurance policies
• Stocks and bonds

Are CDs FDIC insured?

Certificates of deposit (CDs) are FDIC insured if they’re held at an eligible institution.

Can you have FDIC insurance at more than one bank?

Yes. You can benefit from FDIC insurance to the maximum allowed in each bank you hold a deposit with, so long as the bank in question is an FDIC member.

FDIC insurance and credit unions

If you have accounts with credit unions rather than banks, you’re probably wondering: are credit unions FDIC insured?

FDIC insurance does not apply to credit unions. Instead, credit unions have a different deposit insurance scheme, operated through NCUA⁴ (National Credit Union Administration).

Like FDIC, NCUA is a government agency, and deposits at eligible credit unions are covered to 250,000 USD per depositor, with the full backing of the US government.

What happens if your bank fails? Will your deposits be safe?

It’s not something you particularly want to think about — but what if the worst happens and your bank fails, taking your money with it? This is exactly where FDIC insurance would kick in.

Bank failures are unusual — but if you were unlucky enough to be involved in one, the FDIC would pay out insurance to each depositor to the maximum amount covered by the insurance scheme, and equivalent to the deposit held at the failed bank.

This is usually done quickly — even as soon as the next business day. Usually you'll automatically have a new account at a different bank opened for you, and the FDIC will deposit an amount equivalent to your lost funds (subject to the insurance cap) there.

You can then hold the funds or move them to your preferred bank yourself. In some cases the FDIC will mail out checks to depositors instead.

If you have uninsured funds — which exceeded the maximum FDIC cap at the time the bank failed — the FDIC will pay you back as much as is available, once the bank has been wound up and all assets have been sold.

This takes time, and usually means you’ll get periodic repayments on a cents to the dollar basis. Funds exceeding the FDIC limits are not fully insured, and you’re unlikely to have this excess amount returned in full.

FDIC insurance exists to give customers with funds held in a US bank confidence that their money is safe. By picking an eligible account type at an FDIC insured bank, your money is protected to the FDIC deposit insurance maximum — at the time of writing 250,000 USD per depositor, per insured bank, for each account ownership category.

That means that in the unlikely event that your bank gets into financial difficulty and fails, you should have all or part of your deposit refunded with no extra costs or hassle to yourself.