The Federal Deposit Insurance Corporation (FDIC) is a U.S. government agency that protects your bank deposits if a bank fails. In simple terms, the FDIC is there to make sure everyday people don’t lose their savings just because their bank runs into trouble.
The FDIC was created in 1933, after thousands of banks collapsed during the Great Depression. Back then, people lost their life savings overnight. Today, FDIC insurance helps prevent that kind of financial panic and keeps confidence in the banking system strong.
How FDIC Insurance Works
If you keep money in an FDIC-insured bank and that bank shuts down, the FDIC steps in and reimburses depositors—up to certain limits.
As of now, the FDIC protects up to $250,000 per depositor, per bank, per ownership category. This coverage applies only if the bank is officially insured by the FDIC, which most U.S. banks are.
Before opening an account, it’s always smart to check that the bank displays the FDIC logo or confirms its insured status.
What Types of Accounts Are Protected?
FDIC insurance covers most everyday bank accounts, including:
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Checking accounts
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Savings accounts
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Certificates of deposit (CDs)
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Money market deposit accounts
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Individual Retirement Accounts (IRAs), if held as bank deposits
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Joint accounts
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Trust accounts
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Employee benefit plan accounts
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Business accounts (LLCs, partnerships, corporations)
If your money is sitting in one of these account types at an FDIC-insured bank, it’s generally protected within the coverage limits.
What Is Not Covered by the FDIC?
FDIC insurance does not protect investment products, even if you bought them through a bank. These include:
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Stocks and bonds
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Mutual funds
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ETFs
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Annuities
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Life insurance policies
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Cryptocurrency
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Items inside a safe-deposit box
These products can lose value due to market changes, and the FDIC does not cover investment losses.
Real-Life Examples of FDIC Coverage
Example 1:
You have $200,000 in a savings account and $100,000 in a CD at the same bank.
➡️ Total deposits: $300,000
➡️ FDIC coverage: $250,000
➡️ Uninsured amount: $50,000
Example 2:
A married couple has $500,000 in a joint checking account and $250,000 in one spouse’s IRA at the same bank.
➡️ Both accounts are fully covered because they fall under different ownership categories.
This is why understanding account ownership matters when managing large balances.
Why the FDIC Exists
The main goal of the FDIC is to prevent bank runs—situations where people rush to withdraw their money because they fear a bank might fail.
When depositors know their money is protected, they’re less likely to panic. This stability helps banks work through problems without collapsing and protects the entire economy from unnecessary chaos.
What Happens If a Bank Fails?
If an FDIC-insured bank closes:
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The FDIC typically transfers your insured deposits to another bank
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Or sends you a check for your insured amount
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Most customers regain access to their money within days
In many cases, depositors barely notice the transition.
Filing a Claim With the FDIC
Most of the time, customers don’t need to file a claim at all—the FDIC handles repayment automatically.
If needed, you can contact the FDIC directly through its website or customer service hotline. Assistance is free.
Keep in mind:
The FDIC only covers bank failure, not losses from scams, fraud, or identity theft. Those issues must be handled with your bank directly.
Banks vs. Credit Unions: A Quick Note
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Banks are insured by the FDIC
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Credit unions are insured by the National Credit Union Administration (NCUA)
Both offer the same $250,000 coverage limit, just through different agencies.
Why FDIC Insurance Is Important for You
FDIC insurance allows you to:
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Save money without fear of losing it due to bank failure
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Use checking and savings accounts with confidence
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Plan long-term goals like buying a home or saving for retirement
It’s one of the strongest consumer protections in the U.S. financial system.
The Bottom Line
The FDIC exists to protect everyday bank customers. If your bank fails, the FDIC ensures your insured deposits—up to $250,000—are safe.
Before depositing money, always confirm your bank is FDIC-insured and understand how coverage limits work. Doing so helps you protect your savings and gives you peace of mind in an unpredictable financial world.
