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7 Things Seniors (and Everyone Else) Should Know About FDIC Insurance

Many older Americans put their money and their trust in FDIC-insured bank accounts because they want peace of mind when it comes to their savings. Here are a few things senior citizens should know and remember about FDIC insurance.

  1. The basic insurance limit is $100,000 per depositor per insured bank. If you or your family has $100,000 or less in all of your accounts at the same insured bank, you don’t need to worry about your insurance coverage. Your funds are fully insured. If your money is separated between banks, each one will be insured separately.
  2. You may qualify for more than $100,000 in coverage at one insured bank if you have accounts in different ownership categories. There are several different ownership categories, but the most common for consumers are single ownership accounts (for one owner), joint ownership accounts (for two or more people), self-directed retirement accounts (Individual Retirement Accounts and Keogh accounts for which you choose how and where the money is deposited) and revocable trusts (a deposit account saying the funds will pass to one or more named beneficiaries when the owner dies). Each ownership category is separately insured. That means, one person could have far more than $100,000 of FDIC insurance coverage at the same bank if the funds are in separate ownership categories.
  3. A death or divorce in the family can reduce the FDIC insurance coverage. Let’s say two people own an account and one dies. The FDIC’s rules allow a six-month grace period after a depositor’s death to give survivors or estate executors a chance to restructure accounts. If you fail to act within six months, you run the risk of the accounts going over the $100,000 limit. Also, be aware that the death or divorce of a beneficiary on certain trust accounts can reduce the insurance coverage immediately. There is no six-month grace period in those situations.
  4. No depositor has lost a single cent of FDIC-insured funds as a result of a failure. FDIC insurance only comes into play when an FDIC-insured banking institution fails. Fortunately, bank failures are rare nowadays. This is largely because, all FDIC-insured banking institutions must meet high standards for financial strength and stability. But, if your bank were to fail, FDIC insurance would cover your deposit accounts, dollar for dollar, including principle and accrued interest, up to the insurance limit. If your bank fails and you have deposits above the $100,000 federal insurance limit, you may be able to recover some, or in rare cases, all of your uninsured funds.
  5. The FDIC’s deposit insurance guarantee is rock solid. As of mid-year 2005, the FDIC had $48 billion in reserves to protect depositors. Some people say they’ve been told, that the FDIC doesn’t have the resources to cover depositors’ insured funds if an unprecedented number of banks were to fail. That’s false information.
  6. The FDIC pays depositors promptly after the failure of an insured bank. Most insurance payments are made within a few days, usually by the next business day after the bank is closed. Don’t believe the misinformation being spread by some investment sellers, who claim that the FDIC takes years to pay insured depositors.