How to Maximize Your FDIC Insurance Coverage

Some people think that all of the money they deposit into the bank, regardless of account type, is completely covered. Others mistakenly believe that they can make deposits at separate branches of the same bank and have total FDIC coverage.

Common Misconceptions

Some people believe that deposits made at distinct branches of the same bank are separately insured up to $250,000.  However, the FDIC does not differentiate between different branches of the same bank.  For example, if you make a $250,000 deposit at a Wells Fargo in San Diego and a $250,000 deposit at a Wells Fargo in San Francisco, both of these deposits count towards your $250,000 limit.  Therefore, you would have $250,000 of uninsured deposits at Wells Fargo.

As long as these deposits are made to accounts with the same ownership classification, the FDIC will only insure $250,000 at that bank.  If you’re trying to maximize your insurance by depositing money at different banks, you should be positive that these banks are separate.  Some banks may have different names but are still under the same umbrella bank.

Often, people think that the FDIC insures every financial product that a bank offers. This is also not the case.  Banks offer annuities, mutual funds, life insurance policies, stocks, and bonds.  These products are not FDIC insured, even if they are under your $250,000 limit.  Though the bank is required to inform its customers that such financial products are not FDIC insured, many customers glaze over this fact or don’t really know what it implies.

Ways to Maximize Your Coverage

Though navigating the FDIC insurance rules can be tricky at times, there are still ways to ensure your money is backed by the FDIC. Since the FDIC insurance limit of $250,000 is per ownership category at each bank, you can easily maximize your coverage in one of two ways.

First, you can deposit your money at different banks.  By spreading your money out among distinct banks, you can have well over $250,000 deposited in the bank and still feel secure knowing that the full amount is covered.  You can be certain that the banks are different entities by confirming the FDIC certificate number, which is unique to each bank.

If you’re looking to get started w/ a particular bank, I recommend having a look at American Express National Bank – Member FDIC.  The American Express® Personal Savings Account currently offers a 1.00% Annual Percentage Yield (as of 06.25.2020) and requires no minimum deposit to open an account or minimum balance to earn interest.  1.00% APY isn’t going to make you rich, but it will work to make you more money, while ensuring your money is always protected.

Secondly, you can open accounts in different ownership categories at the same bank to maximize your FDIC insurance coverage.  Each ownership category is separately insured for $250,000 per person. Therefore, a person can have:

• A personal account with $250,000
• A corporate account with $250,000
• A trust account with $250,000
• A joint account with his/her spouse for $500,000 ($250,000 for each person)

All of these accounts can be opened at the same bank and the individual will be completely insured with the FDIC for $1,000,000.  In order for two people with a joint account to each be insured for $250,000, both people must have equal and complete access to the account.  Otherwise, only the principal account holder will be insured for $250,000.  Understanding these FDIC insurance policies will help you ensure that your bank deposits are insured to the maximum possible extent.

If you would like to diversify the banks you currently use for depositing and investments, have a look at our best online banks page.

Best Online Banks — Short Reviews