Is my money safe? Here are the pros and cons of FDIC insurance

People wait for service in front of the Silicon Valley Bank in Menlo Park, California.

Johannes Brecher | The Washington Post | Getty Images

Account holders at the failed Silicon Valley Bank and Signature Bank have had a stroke of luck in recent days as federal emergency measures ensured billions in uninsured deposits were protected.

But the same may not apply the next time another bank fails, Treasury Secretary Janet Yellen said this week.

Depositors generally have coverage of up to $250,000 per bank and per account holder category through the Federal Deposit Insurance Corporation, or FDIC.

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However, many of Silicon Valley Bank’s clients, which primarily included venture capital firms, small technology companies, and entrepreneurs, had uninsured deposits at the time of the failure. Data from S&P Global Market Intelligence from 2022 showed that 94% of SVB depositors were above the FDIC limit of $250,000.

Those depositors, as well as those of Signature Bank, were given a reprieve when the banking regulator announced a plan to fully insure all deposits, among other measures designed to help prevent a major financial emergency from being triggered.

“The American people and American businesses can have confidence that their bank deposits will be there when they need them,” President Joe Biden said Monday.

Yellen said that going forward, however, uninsured deposits would only be covered if “a failure to protect uninsured depositors would create systemic risk and significant economic and financial consequences.”

For many consumers, recent bank failures may bring back memories of the 2008 financial crisis.

While experts say this time is different, there’s no guarantee another bug won’t occur. Certain other institutions have also shown signs of stress this week. First Republic received financial help from other financial institutions to stem their troubles, while Credit Suisse also borrowed billions.

Experts say now is the time to make sure your deposits are protected.

How FDIC coverage works

The limit for FDIC coverage is $250,000 per depositor, per bank, and in each account holder category.

Since the independent government agency began offering insurance coverage in 1934, no depositor has lost their insured funds due to a bank failure. The FDIC is funded by premiums paid by banks and thrifts.

“The majority of Americans will be covered by FDIC insurance because most Americans have less than $250,000 in any given bank account,” said Ted Jenkin, a certified financial planner and CEO and founder of oXYGen Financial, a financial advisory and wealth management firm Based in Atlanta. He is a member of CNBC’s Financial Advisor Council.

The majority of Americans will be covered by FDIC insurance.


CEO of oXYGen Financial

According to Jude Boudreaux, CFP and senior financial planner at the Planning Center in New Orleans, who is also a member of CNBC’s Financial Advisor Council, the amount of insurance is based on the rightful owner’s name.

For example, a married couple with a business may have insured up to $250,000 in an account in the name of one spouse, up to $250,000 in an account in the other spouse’s name, and up to $250,000 in a business account.

How to Verify and Strengthen FDIC Protection

If you want to know if your deposits are FDIC-insured, check your bank statement, Jenkin said.

“When you go to a bank or put your money anywhere, the first question you should ask is, ‘The money I’m putting in now, is it FDIC insured?’” Jenkin said.

You can also check the FDIC’s Electronic Deposit Insurance Estimator to determine if your funds are insured with your institution and if any portion exceeds coverage limits.

Customers in front of a Silicon Valley Bank branch in Beverly Hills, California on March 13, 2023.

Lauren Justice | Bloomberg | Getty Images

One way to increase your FDIC coverage is to open accounts with other banks, especially if you have more than $250,000 in deposits, Boudreaux said.

If you want additional coverage, you should also speak to your current bank, Boudreaux suggested. In some cases, they may work with other FDIC-insured entities to protect and insure larger cash deposits.

Small businesses may also want to explore the possibility of seeking additional coverage from multiple banks.

Other financial safety nets can help

Treasury bills are also a strong option now as short term bills are currently yielding well and are backed by the full confidence and credit of the US government. “They’re as good as it gets from a safety standpoint,” said Boudreaux.

Not all accounts offer FDIC coverage, Jenkin noted. For example, a brokerage account opened with a financial advisor is likely to be covered by the Securities Investor Protection Corporation, or SIPC.

Under FDIC coverage, you’ll be reimbursed dollar for dollar if your bank defaults, plus any interest earned up to the date of default.

If something happens to your brokerage firm, you’re covered for up to $500,000 under SIPC, with a $250,000 cash limit.

However, protection under SIPC is limited and specifically offers no protection if your securities fall in value.


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