Insurance on Money: Are You Covered? By Dr. Bernice Wilson, Resource Management Specialist

Money is a form of exchange and insurance is protection for something valuable. We often think of the two in different perspectives. As banking consumers we have insurance coverage for our money when we deposit it in a financial institution that is insured by the Federal Deposit Insurance Corporation (FDIC). The best way to determine if our money is safe is to call the FDIC's toll-free hotline at 1-877-275-3342.

The FDIC is affiliated with the United States government. During an economic period called the Great Depression, thousands of banks closed. Businesses and families all across American lost money they deposited in these banks. The Great Depression gave rise to the FDIC. In 1933, Congress created the FDIC to make sure that in the event a bank closes, the bank's customers will get their deposits back, which includes earned interest up to the insurance limits under the federal law. Today, FDIC boasts that no depositors have lost a single penny of insured money that falls within compliance of the federal law. However, customers of financial institutions should review their accounts to ensure that deposits are not above the insured limit for that account.

FDIC Consumer News (2007/2008) provides the following example on how to determine if an account is insured:

If two people have a $150,000 joint account that is fully insured by the FDIC up to $200,000, and one of them dies, the surviving account owner has six months to place the account in his or her name. If this deadline is not met, then the account is insured as "the survivor's single-ownership deposit along with any other accounts in that group, up to $100,000 thus leaving $50,000 or more over the insurance limit and at risk of loss if the bank failed."

Also review your insurance coverage if you have accounts at two banking institutions that merge, and these funds exceed $100,000. Accounts at institutions prior to the business merger are insured for six months after the merger or longer for certificates of deposit. However, you will need to review the account within the 6-month grace period to avoid any problems with uninsured funds.

You can also find out if an account is covered by visiting the FDIC website at www.fdic.gov/deposit/deposits/ to access the interactive Electronic Deposit Insurance Estimator. This site allows customers to calculate the insurance coverage of their accounts and obtain a printed report detailing insurance information.

Internet banking is an accepted and more convenient way of banking in today's society. Deposits placed in a FDIC Internet bank are also protected in the same way as traditional banks. The most important thing to remember about Internet banking is to be sure you are dealing with a reliable bank. There are shrewd Internet banks that closely resemble traditional banks on the Web. Crooks set up these websites to deceive people into providing personal information that can be used against them in identity theft scams. Therefore, make sure the Internet financial institution is FDIC-related by verifying it with the FDIC's Institution Directory system at www2.fdic.gov/idasp. You can also verify the trade name the bank is operating under.

For additional information on bank insurance, start with the Bank Find page on the Web at http://www2.fdic.gov/idasp/main_bankfind.asp or call the FDIC toll-free at 1-877-275-3342.

Federal Deposit Insurance Corporation. (Winter 2007/2008). Know your limits: Why, when and how to be sure you're fully protected by FDIC insurance. FDIC Consumer News. Retrieved July 21, 2008.

Federal Deposit Insurance Corporation. (November 8, 2007). FDIC insurance: You've got questions, we've got answers. FDIC Consumer News. Retrieved July 21, 2008.

Federal Deposit Insurance Corporation. (August 18, 2006). The FDIC-Who we are and why you should know about us. FDIC Consumer News. Retrieved July 21, 2008.

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