Placards across local bank branches indicate that depositors are “insured to at least $250,000,” but bank depositors who maintain a balance higher than $250,000 may find their money lost in the event of an institution’s failure.
The FDIC was established during the Great Depression as part of an effort to stabilize the U.S. financial system. The regulator oversees the banking system and performs some consumer protection functions, but its most important function is to insure the money deposited in banks and other institutions. If a bank should become insolvent, depositors are guaranteed their money back, a situation that, until recently, seemed improbable. Bank failures, however, have remained a common occurrence since the Great Depression and Great Recession of 2008-2009, Cleveland Jewish News reports.
After the financial crisis, the FDIC raised the standard insured deposit amount to $250,000 per depositor, per insured institution, across all ownership categories, including single accounts, certain retirement accounts, joint accounts, revocable trust accounts, employee benefit plan accounts and government accounts. For nearly 30 years leading up to the crisis, however, the insured limit was $100,000.
“This means that one bank customer may be insured for more than the $250,000 limit if he or she has monies in multiple types of accounts,” Andrew Zashin, the co-managing partner of Zashin & Rich and an adjunct professor of law at Case Western Reserve University School of Law, said, according to Cleveland Jewish News. “Further, one account may be insured for more than the standard limit if, for example, it is owned jointly. In such a case each owner will be separately insured.”
Depositors with less than $250,000 in accounts are fully insured. Other depositors with more than $250,000 in deposits should consider diversifying their financial portfolio to ensure full insurance coverage.