Financial Education Resources

You have probably seen the FDIC sign at your local bank or noticed the logo on various marketing items, including our website. Though you are familiar with the term FDIC, what does it mean for your bank deposits to be FDIC insured?

What is the FDIC?

FDIC stands for Federal Deposit Insurance Corporation. Their website, www.fdic.org, explains that the FDIC is “an independent agency of the United States government that protects bank depositors against the loss of their insured deposits in the event that an FDIC-insured bank or savings association fails. FDIC insurance is backed by the full faith and credit of the United States government.”

The FDIC was created in 1933 in response to the thousands of bank failures during the Great Depression. Since the start of FDIC insurance in 1934, nobody has lost a dime of FDIC-insured deposits up to $250,000.

What Is Deposit Insurance?

FDIC deposit insurance protects bank customers in the event that an FDIC-insured depository institution fails. Bank customers do not need to purchase deposit insurance; it is automatic for any deposit account opened at an FDIC-insured bank. Deposits are insured up to at least $250,000 per depositor, per FDIC-insured bank, per ownership category.

Deposit insurance is calculated dollar-for-dollar, principal plus any interest accrued or due to the depositor, through the date of default. For example, if a customer has a CD account in their name alone with a principal balance of $195,000 and $3,000 in accrued interest, the full $198,000 would be insured.

FDIC Insurance Limits

What does it mean to have FDIC insurance coverage up to $250,000 per depositor, per institution? This means that the FDIC insures deposits that one person owns in one insured bank and that’s separate from any deposits that person owns in a different, insured bank. If a person owns deposits in different branches of the same insured bank, those deposits are counted together toward the $250,000 limit.

Separate coverage is available for money that’s in different categories of ownership. For example, if a person has multiple accounts at an insured bank, they could qualify for more than $250,000 in coverage if their funds are in accounts that are in different ownership categories and other requirements are met. If an account is co-owned by two people, it is insured for up to $250,000 per person for a total of $500,000.

Does Deposit Insurance Cover Every Financial Product?

FDIC deposit insurance only covers certain deposit products, such as checking and savings accounts, money market deposit accounts (MMDAs), and certificates of deposit (CDs). To view a full list of deposit products covered by FDIC insurance and the amount of deposit insurance coverage that may be available under FDIC’s different ownership categories, click here: Are My Accounts Insured by the FDIC?

Investment products that are not deposits, such as mutual funds, annuities, life insurance policies and stocks and bonds, are not covered by FDIC deposit insurance.

What Happens When a Bank Fails?

In the unlikely event of bank failure, The FDIC acts quickly to protect insured depositors. In some cases, the FDIC will become the receiver of the failed bank to sell or collect assets, settle debts, and manage insured deposits. The FDIC typically arranges for a healthy bank to acquire a failed bank. When there is no open acquirer for the deposits, the FDIC will pay the depositor directly by check up to the insured balance in each account. These payments usually begin within a few days after a bank closing.

It's important to note that not all banks are FDIC-insured. Banks and savings associations that are insured by the FDIC will display the FDIC logo on their premises and websites. You can also use the FDIC's BankFind tool to check if your bank is insured.

Centennial Bank is Member FDIC. We strive to provide the best banking experience by diligently working to protect your assets.

For more information about FDIC Insurance, contact us or visit the FDIC website.