So I’ve heard about FDIC insurance and how it means that “your account is insured for up to $250,000.”
But let’s say I won $1M in the lottery. In order to maximize my insurance coverage, would I have to open up accounts at 4 separate banks? Or could I open 4 accounts at the same bank? If the latter, would these 4 accounts have to have their own separate logins? Or could I have a single login with, say, 4 money market accounts under that single login?
I swear I’ve tried to Google different variations of this question. I have even asked the poor accounts officer at my bank, but he didn’t seem terribly confident in his answer.
In: Economics
FDIC will protect $250k per person per deposit type. So your savings account is counted separately from your checking account. You can also have a CD or any other account type, but only $250k worth for each type so 2 savings accounts count as 1 type.
This way FDIC will insure more than $250k but you have to have $250k in savings $250k in checking $250k in CD in money market. Anything over those limits is not insured.
You would have to open 4 accounts in 4 separate banks, not just different branches of the same bank. This is pretty complex, as little banks get bought and sold all the time. Of course, this would involve 4 separate logins, but financial software like Quicken might make that transparent to you (not an ad for Quicken).
Here’s what happens, it happened to me once, your bank might start to fail. Then the local bank regulators, the country is divided up into districts, start to ask questions. When the bank can’t satisfy the regulators, they just show up one day and seize the bank. This happened a couple years ago with Silicon Valley Bank, and it happens several times every year.
You get a letter saying “Your bank has been seized by the Feds, we have good news and bad news. Good news, you will get your money back. Bad news, it will take a little time.” Their first strategy is to get a bigger bank to buy the broken bank and take over the accounts. This is great, because it’s fast and you get mostly the same services. The only downside is that it can cause you to have $500K in the bigger bank, and have to start looking for another bank to move money to. If they can’t make someone buy the broken bank, they liquidate it. You get some of your money right away, and the rest in a couple of months. You have to open a new bank account to deposit these checks, and hope you pick better the next time.
As it happens, some banks offer a service called ICS where they spread your money between multiple banks so that none of the accounts exceed $250k.
However, your deposit at a single bank is only insured by the FDIC to $250k, regardless of how many accounts you have.
That being said, the FDIC offers additional value. It requires member banks to follow safe procedures to reduce the risk of them going under. Currently, it is the most substantial regulatory scheme for banking in the US, as banks tend to want to be FDIC insured but need to follow its rules to do so. If a bank is insolvent or about to be, the FDIC can even step in to try to ensure none of its deposits are lost, often this means arranging for another bank to buy some or all of the failing bank at a reduced cost and promising to guarantee all the deposits.
Banks that are actually FDIC insured have to follow strict rules where your risk is low – splitting it up make minimal sense. You should not keep $1 million on a bank account anyway but move most of it into stocks, etfs or bonds
A lot of wrong answers here. If you want to play around and simulate it, use Edie.fdic.gov. Or look into the intrafi network of banks. If there is one local, go ask them how to get involved in the program for Fdic protection.
Thanks to all of you who answered! This conversation actually helped me figure out how better to google it… [Nerd Wallet](https://www.nerdwallet.com/article/banking/fdic-insurance) seems to have a thorough explanation with examples, including a scenario I never would have considered (the “ownership category” of joint ownership).
Your opinions differed from each other in places, so I thought I’d share the link here in case y’all wanted to review it.
FDIC Insurance is Per Person per Bank. See this webpage on the FDIC’s site:
https://www.fdic.gov/resources/deposit-insurance/brochures/insured-deposits#:~:text=The%20standard%20maximum%20deposit%20insurance,another%20separately%20chartered%20insured%20bank.
So if you have an account at Bank A, with $250k in it, all $250k is protected.
If you have two accounts at Bank B, One with $150k and the other with $250k, only $250k is protected by FDIC Insurance.
Yep, you would need to go to multiple banks. Found this one out, apparently making multiple accounts within the same bank (such as 4 different savings which would be FDIC eligible) doesn’t count.
It’s funny because the wording sounds like it is per account but it is per customer.
People here have told you how FDIC insurance works. But in real life, it really doesn’t matter. There are relatively few bank failures each year and in every case their assets are bought by another bank. No everyday consumer loses money in a bank failure these days.
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