The sign at your bank or savings and loan states that your accounts are insured up to $100,000. Knowing the rules of the Federal Deposit Insurance Corporation (FDIC) can help you extend your protection beyond this amount.
Generally, the FDIC insures only $100,000 per person per institution. Thus, if you have more than one account in a single bank, only $100,000 of the aggregate of your accounts is protected. Amounts over that are uninsured.
To increase your protection, you can simply spread your accounts over a number of different banks. Remember, however, that accounts in different branches of the same bank will be aggregated. Only $100,000 will be insured if, for example, you have $40,000 in Branch A and $90,000 in Branch B.
Because joint accounts are insured apart from separate accounts, you can increase your protection by placing some funds into a joint account. If you and your spouse have a joint account and each of you has a separate account, the three accounts can be insured to a total of $300,000. As with personal accounts, however, all joint accounts held by the same persons will be aggregated.
Different types of accounts are also aggregated. For example, if you have an $80,000 certificate of deposit, a $10,000 checking account, and a $30,000 savings account all at the same bank, $20,000 of the total will not be insured. Individual retirement accounts (IRAs), however, are separately insured to $250,000 as are some trusts.
Finally, the FDIC’s protection includes both principal and interest. Once the account grows to $100,000, any additional interest earned will not be insured. Review your accounts with your banker to be sure you have the protection you need.
David Compton is a Certified Public Accountant with offices in Meridian and Birmingham, Ala.
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