How risky are uninsured bank deposits?

[RedEarth]

PALM BEACH GARDENS, Fla. (MarketWatch) -- The Federal Deposit Insurance Corp. is gearing up for the prospect of a large bank failure. So double-check that all your deposits, including interest, are well within FDIC insurance limits.

The agency seeks comment by April 14 on a proposed rule designed to help it make a quick insurance determination amid an increasingly complex quagmire of FDIC rules and tough-to-figure-out bank accounts.

One section would place a provisional hold on a fraction - say, 10% or so -- of certain account balances at some 159 of the nation's largest banks. The hold could affect some accounts with balances under $100,000.

If you have uninsured deposits at a bank, should you worry? Possibly. Depositors without FDIC coverage lost money in at least two recent failures -- NetBank, Alpharetta, Ga., and Miami Valley Bank, Lakeview, Ohio.

Of $109 million in uninsured deposits at NetBank, nearly 30% has not yet been reimbursed. Of $14 million in uninsured funds at Miami Valley, only 5.9% of uninsured funds, so far, has been reimbursed. All deposits in the most recent failure -- Douglass National Bank, Kansas City, Mo. -- have been reimbursed.

Fortunately, FDIC insurance limits have increased on certain accounts in recent years. Certain retirement accounts, for example, now are insured to $250,000, up from $100,000 per person.

http://custom.marketwatch.com/custom/myway-com/news-story.asp?guid={03FBB3D6-6F11-455A-8730-04DC7082FEEA}

[bluestateguy]

1. I've always wondered what happens if you have a bank deposit of over $100,000

Not that that applies to me...

but what abut the insurance? Does that mean that you have to buy your own insurance policy?

[RedEarth]

2. Need to set up another account either at a person's existing bank or

a different bank....since each account is insured up to 100,000.

[lurky]

6. FYI, It has to be a different bank.

The $100,000 cap is for the total of all your deposits at that particular bank. If you have two accounts with $100,000 each at the same bank, and it goes bust, you will lose half your money. If you move one account to a different bank, no problem.

Not that I have this problem, but I thought I should clarify. :)

[RedEarth]

9. For non-retirement individual accounts that's true.... more information from the FDIC

Basic Insurance Amount Is $100,000
The basic insurance amount is $100,000 per depositor per insured bank. Certain retirement accounts, such as Individual Retirement Accounts, are insured up to $250,000 per depositor per insured bank.

If you and your family have $100,000 or less in all of your deposit accounts at the same insured bank, you do not need to worry about your insurance coverage -- your deposits are fully insured.

Coverage Over $100,000
The FDIC provides separate insurance coverage for deposit accounts held in different categories of ownership.

You may qualify for more than $100,000 in coverage at one insured bank if you own deposit accounts in different ownership categories.

Common Ownership Categories
The most common ownership categories are:

Single Accounts
Certain Retirement Accounts
Joint Accounts
Revocable Trust Accounts
Single Accounts
These are deposit accounts owned by one person and titled in that person’s name only. All of your single accounts at the same insured bank are added together and the total is insured up to $100,000. For example, if you have a checking account and a CD at the same insured bank, and both accounts are in your name only, the two accounts are added together and the total is insured up to $100,000.

Note: Retirement accounts and qualifying trust accounts are not included in this ownership category.

Certain Retirement Accounts
These are deposit accounts owned by one person and titled in the name of that person’s retirement plan. Only the following types of retirement plans are insured in this ownership category:

Individual Retirement Accounts (IRAs) including traditional IRAs, Roth IRAs, Simplified Employee Pension (SEP) IRAs, and Savings Incentive Match Plans for Employees (SIMPLE) IRAs
Section 457 deferred compensation plan accounts (whether self-directed or not)
Self-directed defined contribution plan accounts
Self-directed Keogh plan (or H.R. 10 plan) accounts
All deposits that an individual has in any of the types of retirement plans listed above at the same insured bank are added together and the total is insured up to $250,000. For example, if an individual has an IRA and a self-directed Keogh account at the same bank, the deposits in both accounts would be added together and insured up to $250,000.

Naming beneficiaries on a retirement account does not increase deposit insurance coverage.

Note: For information about FDIC insurance coverage for a type of retirement plan not listed above, refer to the FDIC resources on the back of this brochure.

Joint Accounts
These are deposit accounts owned by two or more people. If both owners have equal rights to withdraw money from a joint account, each person’s shares of all joint accounts at the same insured bank are added together and the total is insured up to $100,000.

If a couple has a joint checking account and a joint savings account at the same insured bank, each co-owner's shares of the two accounts are added together and insured up to $100,000, providing up to $200,000 in coverage for the couple's joint accounts.

Example: John and Mary have a $220,000 CD at an insured bank. Under FDIC rules, each person's share of each joint account is considered equal unless otherwise stated in the bank’s records. John and Mary each own $110,000 in the joint account category, putting a total of $20,000 ($10,000 for each) over the insurance limit.

Account Holders Ownership Share Amount Insured Amount Uninsured
John $ 110,000 $ 100,000 $ 10,000
Mary $ 110,000 $ 100,000 $ 10,000
Total $ 220,000 $ 200,000 $ 20,000

Note: Jointly owned qualifying trust accounts are not included in this ownership category.

Revocable Trust Accounts

..........more............

http://www.fdic.gov/deposit/deposits/insuringdeposits/index.html

[annabanana]

10. these two paragraphs seem to contradict:

Joint Accounts
These are deposit accounts owned by two or more people. If both owners have equal rights to withdraw money from a joint account, each person’s shares of all joint accounts at the same insured bank are added together and the total is insured up to $100,000.

If a couple has a joint checking account and a joint savings account at the same insured bank, each co-owner's shares of the two accounts are added together and insured up to $100,000, providing up to $200,000 in coverage for the couple's joint accounts.


Maybe I don't know the definition of a "deposit account"? Aren't both checking and savings accounts "deposit"? And what's a money market account?

[Extend a Hand]

3. I've never heard of purchasing private insurance for bank accounts

but I think most financial people recommend setting up multiple accounts at different banks and staying under the limit.

Brokerage accounts aren't insured by the fdic , they have different insurance.

[Demeter]

4. It Can Be Done

our co=op, a non=profit corporation has this arrangement with the bank with our capital reserves.

[Extend a Hand]

5. really?

interesting. who sells it?

[Demeter]

8. I Think The Bank Arranged It

Sorry I don't have more details; I'm not the Treasurer, and there's way too much to keep up with it all.

[fasttense]

7. I wish I had that problem.

I honestly believe very few Americans have that problem.

But for those who might, just remember: The private insurance on your accounts is only as good as the company that gives you that insurance. If the insurance company goes under, so does your insurance.