What Is The FDIC And What Does Its Insurance Cover?

You’ve probably seen the FDIC logo when researching banks. Rest assured, this organization is meant to help you keep your money safe, even when your bank can’t. Learn more about the FDIC and details about its insurance for consumers.

What Does FDIC Stand For?

FDIC, or the Federal Deposit Insurance Corporation, is a government agency that was founded to help instill confidence in the U.S.' financial system. Think of the FDIC as a watchdog to help ensure that financial institutions have systems and processes in place to help keep your money safe.

One of the ways the FDIC protects bank customers is by offering insurance for their deposits. So when a financial institution that’s FDIC insured experiences a bank failure, the FDIC will take over. You should receive up to the insured amount for each account type at the bank.

Why Was the FDIC Created?

The FDIC was formed in 1933 after the stock market crash of 1929 when a whole slew of bank failures happened as a result of customers demanding their money all at once. Since banks weren't able to pay out all deposits on hand, consumers lost their confidence, as well as their money in the banking system.

What Does FDIC Insurance Cover?

FDIC insurance covers deposit accounts at banks that opt into the insurance, including:

• Checking accounts: These types of accounts are meant for everyday use and offer checking writing privileges and debit cards, among other benefits.
• Savings accounts: Savings accounts are meant to help you keep funds that you don’t need often but want to access quickly, like an emergency fund.
• Money market accounts: Your money market account can help you house funds like a savings account, but could have higher interest rates.
• IRAs: Only IRAs held at FDIC-insured banks are protected. In most cases, it’s only the amount you deposited. There may be other requirements the account needs to meet.
• Bank-issued items: Several bank-issued items are FDIC insured, including cashier’s checks and money orders.

How Much Does The FDIC Cover?

The FDIC insures accounts up to $250,000 per depositor per account type at each bank in which you have an account with. For example, if you have a checking and a savings account with one bank, you’ll be insured for $250,000 each account. Or, if you have a savings account at two different banks, each account will also be insured up to $250,000.

What Isn’t Protected By FDIC Insurance Coverage?

FDIC insurance doesn’t cover all financial products, such as the following:

• Mutual funds: Mutual funds is a type of investment account, which the FDIC doesn’t cover.
• Annuities: Insurance and investment products like annuities are administered by insurance companies, which doesn’t fall under what FDIC oversees.
• Insurance policies: The FDIC doesn’t oversee insurance companies, so your policies aren’t insured through the government agency.
• Stocks and bonds: Stocks and bonds fall under investment products, and the FDIC doesn’t oversee brokerage companies.

Who Can File An FDIC Claim?

Consumers have a right to file a claim with the FDIC in the event of a bank failure. It can’t help you look into fraud, theft, or identity theft—for these instances you would need to contact law enforcement.

If you need to send a complaint to the FDIC, you can do so by filling out a form online or in writing via mail. To do so online, you'll need to make an account at the FDIC Information and Support Center. If doing so by mail, contact the FDIC to find out your bank's regulator and contact details.

To help the FDIC process your complaint as efficiently as possible, consider include the following details:

• Your contact details
• Why you're submitting a complaint
• Your bank's name and contact details Documentation that relates to your complaint, such as evidence of wrongdoing
• Details of how you want your complaint to get resolved

What Else Does The FDIC Do?

Aside from protecting your deposits, the FDIC also has other safeguards in place. The agency also helps to ensure banks follow consumer laws such as the Fair Credit Reporting Act, Fair Credit Billing Act, Truth in Lending Act, and the Fair Debt Collection Practices Act. The FDIC also helps to ensure banks offer credit products that meet community needs.

FAQs About The FDIC

To learn more about the FDIC, consider reading the following frequently asked questions.

How do I confirm that my bank is FDIC-insured?

You can confirm that your bank is FDIC insured if it has a FDIC logo on their website or by speaking to a customer representative. Or, you can head to the FDIC website for a list of banks it insures. The FDIC has a tool called GetBanked, which you can use to search for FDIC-insured banks in your area.

Does the FDIC also cover online-only banks?

Yes, the FDIC covers online-only banks, as well as banks that have brick and mortar locations.

Are credit unions covered by the FDIC?

No credit unions aren’t covered by the FDIC. Instead, credit unions have their own government agency, the National Credit Union Administration (NCUA), which functions similar to the FDIC. The NUCA also provides up to $250,000 protection per deposit and account type per credit union. For example, those who have a checking and money market account at a credit union that’s NUCA-insured will have up to $250,000 of their deposits protected in each account. 

Do I need to apply to the FDIC to get insurance protection?

No, you don’t need to apply with the FDIC in order to have your deposits insured. As long as you open a qualifying account with an FDIC-insured bank, your deposits are automatically insured up to $250,000. Any amount above this though is not insured.

Who pays the insurance premiums for FDIC insurance?

Banks that have FDIC-insurance are the ones that pay for it, not the consumers that have bank accounts at these financial institutions. Plus, FDIC insurance is fully backed by the federal government. So if anything happens to the bank, the government steps in.

The Bottom Line: The FDIC Helps Protect Consumers

The FDIC was established to help to protect consumers from not being able to access their funds from certain accounts if a bank fails, or doesn’t have the money to pay back its depositors. Though rare, banks can fail. In other words, the FDIC can help you sleep better at night knowing that it has safeguards in place to protect your money. As long as you don’t keep more than $250,000 in each account type at all the banks you’re a customer at, you’re most likely fine.