Americans’ trust in the banking system was justifiably shaken during the Great Depression. That’s why Congress passed the Banking Act of 1933. It imposed numerous reforms, which included separating investment banking from commercial banking, outlawing interest payments on checking accounts, and restricting speculative uses of bank credit. But of all the Act’s reforms, none had a greater impact than the establishment of the Federal Deposit Insurance Corporation (FDIC).
True to its name, the FDIC is a government corporation that exists to insure deposits in U.S. savings and commercial banks. When a bank fails, the FDIC pays out to all of that bank’s insured depositors. The FDIC is intensely reliable; since its creation, no depositor has lost any money the FDIC has insured. It is the government’s way of preventing a future banking crisis from wiping out millions of Americans’ savings accounts.
How Does FDIC Insurance Work?
If you bank with Sherburne State Bank then you do not need to purchase deposit insurance. It is provided automatically, and it covers up to $250,000 per depositor.
FDIC insurance covers funds held in:
- Money orders
- Savings accounts
- Cashier’s checks
- Checking accounts
- Money market deposit accounts
- Negotiable order of withdrawal (NOW) accounts
- Certificates of deposit (CDs) and other time deposits
Note that FDIC insurance exclusively covers the deposits listed above. Bonds, stocks, mutual funds, annuities, crypto, safe deposit boxes, and other assets are not insured by the FDIC.
How to maximize FDIC coverage
FDIC insurance covers $250,000 per depositor, per bank, for each of the following ownership categories:
- Joint accounts
- Trust accounts
- Single accounts
- Government accounts
- Employee benefit plan accounts
- Certain retirement accounts, including IRAs and 401(k)s
- Corporation / partnership / unincorporated association accounts
In other words, for each account you open under a different ownership category, you are entitled to an additional $250,000 in FDIC coverage. For example, you could keep your checking and savings under your current single account, and then open an additional joint account (in which case each person would be individually covered for a total of $500,000). Alternatively, you could set up a retirement account that would absorb any funds which would make your single account total more than $250,000.
The FDIC has an online tool that anyone can use to verify the coverage of their accounts.
If maximizing FDIC insurance by ownership category is not the right option for you, Sherburne State Bank has a partnership with the Intrafi deposit network. This partnership allows our customers to expand their insurance substantially beyond the standard $250,000 coverage amount. Best of all, we manage the entire process for our customers – and you get the benefit.
Would you like to safeguard your savings? Then we welcome you to contact us or visit one of our locations in Becker, Monticello or Princeton today and we will help you structure your accounts to maximize FDIC insurance coverage!
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