5 Ways To Insure Excess Deposits (2024)

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The Federal Deposit Insurance Corporation (FDIC) insures deposits placed in savings accounts, money market accounts, checking accounts and CDs. This means as long as you bank at an insured institution, your money is protected in the event of a bank failure—at least to a certain degree.

But the recent collapse of Silicon Valley Bank (SVB) highlighted the fact that depositors with higher balances still have cause for concern. That’s because there’s a cap on FDIC insurance and what it protects: $250,000 per depositor, per insured bank, for each account ownership category.

This limit is partly why so many Silicon Valley Bank depositors—largely startups and venture capital-backed companies holding balances well above this threshold—panicked and withdrew their funds as the risk of a bank failure increased, causing SVB to become insolvent. While this could’ve resulted in huge losses for high-balance depositors who didn’t withdraw their money in time, they lucked out when the Biden administration extended FDIC coverage to fully protect all customers, including those with balances above $250,000.

However, this level of protection is not the standard. If you maintain higher balances in your bank accounts, it’s important to understand how much of your money falls under the FDIC insurance limit. Otherwise, some of your deposits could be at risk if your bank goes belly up.

The good news is there are different options for insuring high balances.

How Much Does the FDIC Insure?

Currently, the FDIC insurance limit is $250,000 per depositor, per insured bank, for each account ownership category. The FDIC recognizes these ownership categories when protecting deposits:

  • Individual
  • Joint
  • Certain retirement accounts (such as an IRA)
  • Revocable and irrevocable trust account
  • Employee benefit plan account
  • Corporation, partnership or unincorporated association account
  • Government account

Individual accounts are accounts owned by one person, with no named beneficiaries. So, for example, you may have a checking account and a savings account in your name only. Joint accounts have two or more owners but no named beneficiaries. You might have a joint checking or savings account with a spouse or an aging parent.

Eligible retirement accounts and trust accounts can have one or more beneficiaries.

FDIC insurance extends to all deposit accounts at insured banks. This includes:

  • Checking accounts
  • Savings accounts
  • Money market accounts
  • Certificates of deposit
  • Negotiable order of withdrawal (NOW) accounts
  • Official items issued by the bank (such as cashier’s checks or money orders)

The FDIC insures these accounts, both the principal and interest earned, up to the specified limits. The FDIC does not insure stocks, bonds, mutual funds, life insurance policies, annuities or municipal securities, even if you buy them at an FDIC-insured bank. Keep this in mind if you have those types of assets at a bank.

Understand Your Current Coverage Limits

Before you can insure excess deposits, it’s important to know how much of your deposits are already protected.

For example, say you maintain single ownership of a checking account and a savings account at the same bank. You have $25,000 in checking and $275,000 in savings. According to the FDIC insurance per account rules, $50,000 of your money would not be covered.

Now, say that you’re married. You have the same checking and savings account, but you also share a joint savings account with your spouse with a $500,000 balance. Under FDIC insurance rules, you and your spouse would each have $250,000 in coverage, so the entire account would be protected. But $50,000 of the money in your single ownership accounts would still be unprotected.

If you have multiple accounts at the same financial institution, you can talk to a banker about which ones are protected up to the FDIC limit and how much you may have in excess deposits. You can also use the FDIC’s Electronic Deposit Insurance Estimator to calculate your insurance coverage based on ownership category and account balance.

How to Insure Excess Deposits

The FDIC insurance limit applies to your accounts automatically, so long as your bank is FDIC insured. There’s nothing special you need to do to qualify for it. But what if you have $1 million or more in your accounts? Are there banks that insure millions? And how much cash should you keep in the bank anyway?

Here are some of the best ways to insure excess deposits above the FDIC limits.

1. Open New Accounts at Different Banks

The simplest way to insure excess deposits above the $250,000 FDIC limit may be spreading money around to different banks. Let’s say you have $50,000 that’s not insured at your current bank. You could deposit it into a savings or money market account at another bank and it would be insured there.

This does require a little research first to find the right bank. For example, if you’re looking for savings accounts, you’d want to compare interest rates and fees at different banks. Online banks typically offer higher APYs to savers and lower fees, compared to traditional brick-and-mortar banks.

Theoretically, you could insure $1 million or more by opening multiple accounts and maxing out your FDIC coverage limits. For instance, you could open four savings accounts at four different banks with $250,000 each. The trade-off, of course, is that keeping up with multiple accounts at different banks may not be ideal if you prefer a streamlined approach to money management.

2. Use CDARS to Insure Excess Bank Deposits

Certificate of deposit accounts can be useful for saving toward long-term goals or potentially earning a higher interest rate than you would with a savings account. If you use CDs as part of your savings strategy, it’s possible to use them to work around FDIC insurance limits through CDARS.

The Certificate of Deposit Account Registry Service, or CDARS, represents a network of banks that insure millions for CD savers. Here’s how it works. You sign a CDARS placement agreement and custodial agreement, then invest money with a CDARS network member. This money is then divided into CDs issued by different CDARS banks. So, theoretically, you could invest $5 million with CDARS and have it split into multiple CDs, each of which would be protected by the $250,000 FDIC insurance limit.

This could be a good option if you’re wondering where to find a bank that insures more than the $250,000 FDIC limit. But keep in mind that CDs are time deposits, meaning you agree to leave those funds alone until the CD matures. If you have to tap into any of your CDs before the maturity date, you could face an early withdrawal penalty.

3. Consider Moving Some of Your Money to a Credit Union

Credit unions can offer a safe haven for excess bank deposits. While credit unions are not covered by FDIC insurance protections, they are still protected. The National Credit Union Administration (NCUA) insures deposits up to $250,000 per depositor, per credit union, for each ownership category. You can use the NCUA’s Share Insurance Estimator to determine how much of your deposits would be covered.

Aside from making it possible to insure excess deposits, credit unions can offer some other perks. For instance, you may benefit from higher interest rates on deposit accounts and lower fees, compared to traditional banks. You may also find that credit unions offer more favorable interest rates on loans.

If you’re considering opening a credit union account, approach it the same way you would a bank account. That means comparing the fees you may pay and the interest you could earn, as well as other features such as online and mobile banking access or the size of its ATM network.

4. Open a Cash Management Account

Some brokerages and nonbank financial institutions offer access to a cash management account. Cash management accounts can function like checking accounts, allowing you to spend or pay bills. But they can also be useful for insuring excess deposits.

Cash management accounts that have a sweep feature allow deposits to be spread across multiple FDIC-insured banks. For example, if you have $500,000 in your cash management account, the financial institution may spread it across three banks, sweeping $245,000 into one bank (to account for any unpaid interest that could move your balance above the $250,000 FDIC protection limit), $245,000 into another and $10,000 into the final bank.

This allows you to spread your money out without losing FDIC insurance protections. Keep in mind that this benefit only extends to cash. Any securities you hold at a brokerage would be covered by the Securities Investor Protection Corporation (SIPC), which insures against institutional failures.

5. Weigh Other Options

If you’re specifically looking for banks that insure millions, you might consider an option like MaxSafe. Offered by Wintrust, MaxSafe allows depositors to increase their FDIC insurance limits from $250,000 to $3.75 million.

That’s 15 times higher than the current limit allowed for FDIC insurance per account. MaxSafe works similarly to CDARS, though instead of putting money into CDs, you can spread it across money market accounts at 15 different institutions. There’s a $1,000 minimum deposit required to get started and there are no monthly maintenance fees or minimum balance requirements.

The Depositors Insurance Fund (DIF) is another option for insuring excess deposits. This program covers deposit account balances beyond the $250,000 FDIC limits at member banks. So, once you exhaust your FDIC coverage limits, you’re still protected. There are no forms to fill out to take advantage of this coverage—you simply need to have accounts at a DIF member bank.

Bottom Line

Bank failures, though rare, can happen. And when a bank fails, it’s important to know that your money is safe. If you have deposits that exceed the FDIC’s limits, there are different ways to close the coverage gap. Knowing all possible options for insuring excess deposits can help you find a solution when FDIC protection falls short.

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