What Is FDIC Insurance and How Does It Work?

The Federal Deposit Insurance Corp. (FDIC) was established in 1933 to protect the accounts of Americans when banks fail. You’re covered up to the standard FDIC insurance limit of $250,000 at FDIC-insured banks, and you may be able to insure accounts above that limit if you meet specific rules.

Here are the details about how FDIC insurance works.

What is FDIC insurance?

FDIC insurance safeguards your money in deposits at FDIC banks in the event of bank failures. It covers common deposit accounts, such as checking accounts, savings accounts, money market accounts and certificates of deposit (CDs). 

Coverage is automatic when you open an account at an FDIC-insured bank.

While the FDIC insures bank deposits, the National Credit Union Administration (NCUA) protects credit union accounts. The NCUA, just like the FDIC, backs deposit accounts up to $250,000. The FDIC and the NCUA are both independent federal agencies.

If you’re unsure whether a bank is federally insured, you can use search tools from the FDIC or the NCUA to check. Search for the bank using the FDIC’s BankFind Suite or the NCUA’s Credit Union Locator or Research a Credit Union tool.

Although rare, some U.S. banks and credit unions are not FDIC or NCUA members. These institutions may be insured by state or private agencies or may lack reputable deposit insurance and could be scams.

What are FDIC coverage limits and categories?

The FDIC standard deposit insurance amount is $250,000 per depositor, per FDIC-insured bank, per ownership category. A depositor may be any natural person, not just a citizen or U.S. resident. In addition, a depositor may be a legal entity, such as a corporation.

Coverage can be extended above the $250,000 standard limit for one depositor at one bank through the use of ownership categories. You’ll need to put money in accounts in different ownership categories or use more than one FDIC-insured bank to protect all of your deposits.

FDIC insurance: What is and isn’t covered?

FDIC insurance covers deposit accounts at FDIC-insured banks. This coverage includes the principal of the bank deposits and all accrued interest earnings through the date of the bank’s closing, up to the insurance limit.

FDIC insurance covers:

• Checking accounts
• Negotiable order of withdrawal (NOW) accounts
• Money market accounts
• Savings accounts
• CDs — sometimes called time deposits
• Cashier’s checks and money orders

FDIC insurance does not cover:

• Mutual funds, including money market mutual funds
• Stocks
• Bonds
• Treasury securities
• Municipal securities
• Crypto assets
• Life insurance policies
• Annuities
• Safe deposit box contents
• Money stored in nonbank payment apps, such as Venmo, PayPal and Cash App

FDIC insurance example

Here’s an example to help you understand FDIC insurance coverage as well as limits.

Let’s say you’re single and have $300,000 in one bank. Your money is spread out in the following manner:

• $100,000 in a savings account
• $50,000 in a checking account
• $150,000 in a CD

Each of these accounts falls under the same ownership category — single. That means only $250,000 of your money is covered by FDIC insurance, and you stand to lose $50,000 if your bank fails.

You can expand your protection by spreading the $300,000 across multiple banks.

Jump ahead: How to maximize your FDIC coverage.

What should you know about changes to FDIC insurance for trust accounts?

The FDIC has changed deposit insurance rules for trust accounts as of April 1, 2024. Trust accounts can be complicated, and the FDIC made this rule change in an effort to simplify insurance coverage for trust accounts.

Many depositors, especially those with deposits of $250,000 or less per bank, won’t be affected by the rule change, according to the FDIC. But the rule could decrease coverage for some. The key changes are as follows:

• Each trust owner in this category will be insured up to $250,000 per eligible primary beneficiary, up to five beneficiaries, for maximum coverage of $1.25 million.
• The rule combines irrevocable trust and revocable trust categories into a single category called trust accounts.

How to insure a deposit that exceeds the FDIC limit

The rich aren’t the only ones who may need to insure funds that exceed the FDIC limit. Selling a house, receiving an inheritance and collecting a personal injury judgment are all examples of when you may need to hold more than $250,000 in a bank account. Here are some ways you can insure a larger sum.

Open accounts at multiple banks

The easiest way to insure funds that exceed the $250,000 FDIC limit is to spread money around to different FDIC-insured banks. A balance that far exceeds $250,000 may require opening and maintaining accounts at many banks to ensure the entire balance remains covered.

A time-saving option is the use of “sweep accounts,” which are available from certain brokerage firms, financial technology companies and banks. A sweep account automatically distributes balances to ensure they remain under the $250,000 coverage limit.

Open a joint account

Opening a joint account is a simple way to qualify for more than $250,000 in FDIC coverage. Each account holder adds $250,000 of coverage, meaning two people would qualify for up to $500,000.

Open accounts in different ownership categories

You could open a single account and a joint account, for example. A single account allows maximum coverage of $250,000, and a joint account with two people as co-owners could add up to $500,000, for total coverage of $750,000. You could also consider other ownership categories, including retirement accounts and trust accounts.

Open a trust account

A trust account holds funds for beneficiaries. An account with one owner can provide up to $1.25 million in total FDIC coverage as of April 1, 2024. The account holder’s deposits are insured up to $250,000 for each beneficiary, not to exceed five beneficiaries.

Multiple owners can increase the coverage. For example, a trust account with two owners can provide up to $2.5 million in total coverage.

What happens to your money if your bank fails?

Bank failures are typically rare. So far in 2025, only one bank has failed. Two banks failed in 2024 and five banks failed the year before that, according to the FDIC.

With most bank failures, depositors experience no interruptions in service or loss of access to their accounts. In these cases, the FDIC finds another bank that agrees to assume the deposits of the failed bank.

Depositors of the failed bank automatically become depositors of the new bank. Sometimes, all deposits — even those above the FDIC insurance coverage limits — are assumed by the new bank. Other times, only insured deposits are taken on by the new bank.

However, the new bank may change rates and terms of deposit accounts or close CDs early with no penalty — that could mean the loss of a high interest rate.

A less common outcome when a bank fails is that the FDIC may be unable to find another bank to take on the failed bank’s deposits. In that case, the FDIC would mail checks to depositors for the total insured balance in each account. Checks usually arrive within a few days after the bank’s closure, and the insured balance includes principal and interest up to the date of default.

Frequently asked questions

Do fintech companies have FDIC coverage?

It depends. Fintechs are considered “nonbank companies” and can’t offer FDIC coverage directly. However, some fintechs partner with FDIC-insured banks to hold customer funds. If you’re considering opening an account with a fintech, find out where your money will be held and then confirm that it’s an FDIC member on the FDIC’s website. 

Do I need to sign up for FDIC insurance?

No, you don’t need to enroll in FDIC insurance. You automatically receive coverage when you open a deposit account at an FDIC-insured financial institution.

How can I maximize FDIC coverage?

One of the most common ways to maximize your FDIC coverage is by spreading your money across multiple banks. You may also open accounts with different ownership categories at the same bank.

How does FDIC insurance work for joint accounts?

When you open a joint account with another person, the FDIC insurance doubles. Each of you is protected for up to $250,000, for a total of $500,000.

How long does the FDIC have to pay you back?

In the event of bank failure, the FDIC usually reimburses affected depositors within a few days after the bank closes. If your deposits are extra large or are attached to trust documents, the FDIC may need more time to complete the insurance payout.