2012年7月9日星期一

The Mystery of FDIC Insurance


Lately the stock market has been a very volatile ride. This past year's performance has been poor and with the rising fuel costs and credit crises these investment vehicles seem suspect. Certificate of deposit (CD) rates are not the best they have been but there are still bargains available from banks trying to build strong deposit reserves. Very conservative investors like CDs because most are insured with the Federal Deposit Insurance Corporation (FDIC). FDIC insurance allows account holders to get their money back in case of the insured banks failure. However, understanding how much and what is covered can difficult to understand. Talk with three different bankers at three FDIC insured banks and you will get a variety of answers to questions regarding whether your money is fully insured or not. If you have less than $100,000.00 in an FDIC insured bank you are fully insured. That is if your account is some sort of demand deposit account (i.e. checking, money market), savings account, or time deposit account (CDs). The insurance covers the balance of these accounts, principal and interest earned up to the day of the insured bank's closure. This is a very good thing to have especially with the state of today's economy and the challenging circumstances financial institutions are facing.

As stated before "the basic insurance amount is $100,000.00 per depositor per insured bank." (FDIC-001-2007). Owners of specific IRA accounts are insured up to $250,000.00. A CD for Ms. Bank Customer is insured to $100,000.00, that same CD in an IRA is insured to $250,000.00 in an insured bank. An IRA with mutual funds as its primary investment is not insured under FDIC. Up to now it has been pretty straightforward regarding coverage.

The problem develops when bank customers have more than $100,000.00 in deposits. There are ways to increase the coverage of the FDIC insurance limits. One example is a husband and wife opens a joint account. Each depositor is covered for $100,000.00. The total coverage on that account is $200,000.00. Perhaps they add their three children to be beneficiaries of this money in case of death. The FDIC insurance coverage goes to $600,000.00. This is a great discussion to have with your financial specialist at your insured bank. There are some restrictions to who is covered as a POD (payable on death), but it is a great strategy to increase insurance coverage. Account categories are very important to how FDIC coverage is placed. The first is called the single account. This is where an account(s) is held in one persons name or a fiduciary account for the benefit one person (i.e. minor savings account), sole proprietor business account(s) and account(s) established as an estate. These accounts are insured to $100,000.00. The next category is retirement accounts such as traditional IRAs, Roth IRAs, SEP IRAs and SIMPLE IRAs. Some self directed IRAs fall into this category as well. The coverage on Individual Retirement Accounts is $250,000.00. The revocable trust category has different FDIC limits depending on how the account is set up.

This category indicates the desire for the account owners to leave the balance of deposits to named beneficiaries. As stated earlier there are restrictions to who is qualified to be insured as a beneficiary. A joint account requires that the owners be people and have equal signing rights to the account(s). Then the FDIC coverage will be $100,000.00 per owner per insured bank. Corporations, estates and trusts do not have joint account coverage. This is not an exhaustive guide to FDIC insurance. There are resources available to you to determine for yourself the coverage you need and how to set up your deposit accounts to be properly insured. The FDIC web site is a great place to start. You can find it at http://www.fdic.gov/deposit/deposits. Talk to your personal financial specialist, if you do not have one you should, they can come up with ideas that haven't occurred to you. Some financial institutions are struggling at this time. It is a great relief to know that you will be able to get your money back if the bank fails. Some education and setting up accounts correctly will ensure the proper FDIC coverage on deposits in an insured bank.




Richard Wagner [http://www.richardwwagner.com] Financial Specialist Richard Wagner has been involved with commercial and consumer banking for over 10 years. He has a passion for helping businesses grow and thrive. 'Helping businesses grow stimulates the economy and everyone benefits from this."





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