Insuring more than $250,000 at any one bank is a good problem with real solutions. FDIC covers up to $250,000 per depositor, per category, per bank. Individual accounts can have a cumulative coverage of up to $250,000 at each bank where money is deposited. This does not mean that a person cannot deposit more than $250,000 at any given bank. They have the option to go without FDIC coverage, or they can take one of several steps to ensure their money is still protected. The FDIC guarantee means that even if the bank becomes insolvent (unable to pay all its debts, including deposits), you will be able to recoup your money. Since the beginning of 2008 over 400 banks have failed, so more than ever people want to make sure their money is insured.
As you approach the FDIC coverage limit of $250,000 limit, do not panic. There are many ways to keep your money all at a single bank and still have it insured.
FDIC Insurance on Multiple Accounts
A person can get $250,000 in FDIC insurance coverage per category. For married couples the limit is easily tripled to $750,000 (2 individual and 1 joint account). Further, an individual account, an IRA, and a trust account would each be protected up to the full amount of $250,000. While there are IRS limitations to putting money into an IRA, and there are fees associated with holding a trust account, those who are worried about keeping all their money at the same bank do have the option to open different types of accounts. The depositor must be aware though, FDIC does not cover losses due to stock market performance.
For those who have exhausted the various categories, and are not interested in opening accounts at multiple banks, they do have an option. The Certificate of Account Registry Service allows a person to put money into CD’s at any given bank. The bank, or a service hired by the bank, will open the accounts at different institutions. For every $250,000 over the insured limit the person deposits, the bank will open a new CD at a different institution. This means the depositor will have all the protection FDIC offers, but they will be able to keep all their money at one bank. In exchange for the convenience of working only with one bank the depositor will realize a lower interest rate.