Are You FDIC Insured? Make Sure Your Money Is Safe

Having worked in a financial institution for seven years, I was amazed at how little consumers understand federal deposit insurance. I guess I shouldn’t be so surprised because I myself was not aware of FDIC insurance prior to working at my job in the financial industry. I just assumed I was one of the few who were ill-informed. Sadly no, many people aren’t aware that FDIC coverage exists.

So What Is FDIC Insurance?

Here is the formal description of the Federal Deposit Insurance Corporation (FDIC):

The FDIC is an independent agency of the United States government that protects the funds of depositors that are in FDIC-insured institutions. The FDIC was created in 1933 in response to the thousands of bank failures that occurred in the 1920’s and early 1930’s. Since the FDIC was put in place, nobody has ever lost any money that’s been covered by FDIC insurance.

Bank funds are insured up to $250,000 for each depositor. You should know that this is in effect until December 31, 2013, at which time, this will decrease back to $100,000 per depositor. However, certain retirement accounts (like IRAs) will still be insured up to the maximum of $250,000 per depositor after January 1, 2014.

Some quick facts to know about your FDIC insurance:

• Coverage is automatic, you need not apply, as long as your financial institution is FDIC-insured.
• FDIC guarantees CDs, savings accounts, checking accounts and other deposit accounts.
• FDIC doesn’t guarantee products such as life insurance policies, municipal securities, annuities, mutual funds, stocks and bonds.
• Deposits held at different FDIC-insured banks are subject to separate FDIC insurance coverage plans.

If you have questions regarding your bank or are curious about particulars, the FDIC has a website with many links and tons of information on this topic. If you wish to confirm that a bank is insured, you can use the FDIC’s Bank Find service or you can call the FDIC toll-free.

Are You FDIC Insured? Make Sure Your Money Is Safe!

There, are you feeling better about the security of your deposits? Good. Now, there are a few things you want to double check. Firstly and most importantly, is your bank or financial institution FDIC-insured? Secondly, understand that traditional accounts are going to be insured: these include your basic deposit accounts, checking, savings, certificates of deposit, IRAs and other retirement accounts.

Financial institutions now offer a multitude of other investment products that are not insured. Life insurance policies, municipal securities, annuities, mutual funds, stocks and bonds are not insured by the FDIC. Prior to purchasing a new investment product, you should make a habit of asking if it is FDIC-insured or not, especially if it is outside the norm of traditional products. Here are steps to protect your money:

• Never purchase a product that you don’t understand.
• Have all the information you need prior to investing. Ask questions until you are satisfied.
• Understand the financial risks that you may be taking.
• Know who is investing your money.
• Select a salesperson who knows your financial goals and who will make recommendations based on your personal financial situation, goals and risk tolerance.

Visiting The FDIC Website

A quick visit to the FDIC website will reveal the many services that the FDIC offers. Not only does this agency protect your money, but they also have an Office of the Ombudsman (OO). This service is available to act as a bridge between the financial institutions, the public and the FDIC powers-that-be.

The Office of the Ombudsman’s purpose is to:

• Act as a resource and liaison for the general public and the financial industry.
• Resolve problems and hear complaints in a fair and impartial way.
• Provide timely and helpful feedback to the FDIC.

The FDIC also provides consumer protection information and industry analysis. The FDIC website contains tons of information, including some things to watch out for (and to be highly wary of):

• High CD rates – be cautious, as many of these suppliers are not FDIC insured.
• Credit card interest rate reduction phone scams.
• Emails that claim to have originated from the FDIC: The FDIC does not send out unsolicited messages to the public. It follows that nobody should attempt to click on links found in suspicious email messages of this sort.
• Federal lending laws.
• Blank checks you receive from your credit card company (they come with a price and carry risks).
• Programs to help you through the current financial crisis.
• Various scams that have come about due to the economic downturn.

In closing, only you can answer the question: is your money safe? Are your deposit accounts held at FDIC-insured institutions, and if not, are you comfortable with that?