More Failures, More Coverage

If you’ve been reading the headlines about banks these days, you’re probably worried.  Last year, 140 banks shut their doors; as of the beginning of September this year, the number of bank closings is already up to 125.  That’s compared with three bank closings in the more normal economic times of 2007.  At last count (June 30 of this year), 829 other banks were on the Federal Deposit Insurance Corp.’s “Problem Bank List,” meaning they have weak capital positions that could lead to failure.

But if you have substantial assets on deposit at a lending institution, you do have some protection against losing money in a failure, and a way to check how much.  The FDIC provides government-backed insurance for your deposits, and the new financial reform bill permanently raised this amount to $250,000 per depositor.

As it happens, you probably have more protection than you think.  The FDIC has created a web calculator called EDIE (https://www.fdic.gov/edie/calculator.html), which lets you input the name of your lending institution, the value of your deposit, personal, business or trust accounts, and it will tell you how much of your money at that institution is insured.  A quick run through the site shows that if a husband and wife have a joint deposit account worth $500,000, then the total amount is insured–$250,000 each.  Suppose one of them also has a business checking account as a sole proprietor?  That, too, is insured up to $250,000.  A trust with beneficiaries is also protected, with the amount of coverage going up the more beneficiaries there are.  A tutorial on the site gives the example of a $1.2 million trust co-owned by a husband and wife who have three named beneficiaries (their children).  The way the math works, the full amount is insured; each child counts for $200,000 of FDIC insurance with the father and for the same amount with the mother.

Before you go to the web site, however, you might first want to check and make sure that your lending institution is a member of the FDIC.  Most member banks have official FDIC signs prominently displayed at the teller windows, but you can also check online at the FDIC web site’s “bank find” feature: http://www2.fdic.gov/idasp/main_bankfind.asp.

And finally, understand that stocks, bonds, mutual funds, annuities or other investments don’t qualify for FDIC coverage.  Only CDs, checking accounts and deposits are FDIC insured.

Authored by Bob Veres

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