The (FDIC) and the (NCUA) insure deposits at banks and credit unions, respectively. Both provide insurance of up to $250,000 per depositor, per insured institution, for each account ownership category. This means that if you have accounts in different ownership categories (such as individual, joint, and retirement accounts), each category is insured up to $250,000 in case the institution fails.
Having these programs in place gives people peace of mind. For most customers, it’s enough to keep all their money safe. But if you have more than $250,000, those funds could be at risk. While you can keep your money at different financial institutions, you’ll need to consider other options if you don’t want to split up your money.
Insuring deposits over $250,000
If you have more than $250,000 to insure, you can do so without opening accounts at several different banks. Here are some options to consider.
Add a joint account holder
Each account holder is separately insured up to $250,000. Adding a holder will double the insurance coverage to $500,000. If you are married and have already combined your finances with your spouse, this is a good choice since it doubles your insurance coverage without changing anything financially.
Put the money into a different ownership category
Joint accounts are one ownership category, but you can have other categories, such as individual accounts, retirement accounts, and trusts. Opening accounts in additional ownership categories will result in $250,000 more in insurance coverage, even if you do so at your existing bank or credit union.
This approach simplifies things by keeping all your accounts at one bank. Some banks let you see all your accounts in a single dashboard, making them easier to manage.
Look for a bank that offers both FDIC and DIF insurance
While the FDIC insures deposits up to $250,000, the Depositors Insurance Fund (DIF) insures deposits specifically for Massachusetts-chartered banks. The DIF insures deposits above the $250,000 threshold, and there is no specific limit to how much it will insure.
Some banks have both FDIC and DIF insurance. The FDIC insures their deposits up to the $250,000 limit, and the DIF insures deposits above $250,000 with no specific limit.
Of course, this is limited to Massachusetts-chartered banks, so only a select few banks will be covered by both insurance programs. Still, some of these banks may let you open an account online, even if you aren’t a Massachusetts resident. And some , such as Bank5 Connect, also provide DIF insurance. This makes it an intriguing option if you have a lot of cash and insurance coverage is important to you.
Take advantage of deposit insurance networks
The IntraFi Network is a service banks use to offer insurance coverage beyond the typical $250,000 amount. Banks use programs such as the Certificate of Deposit Account Registry Service (CDARS) or Insured Cash Sweep (ICS) to spread money across multiple banks.
To be clear, you don’t need to maintain relationships with multiple banks to take advantage of this service. If your bank belongs to the network, you can deposit all your money with your bank, and it will do the rest. The funds may be deposited across several banks, but you only have to deal with your home bank.
This service may be available with several account types, such as demand deposit accounts, (CDs), and (MMAs). This makes it ideal for maintaining large sums of cash, regardless of your preferred account type.
Changes to FDIC insurance for trust accounts
Effective April 1, 2024, the FDIC implemented new rules regarding trust account insurance. In the past, there were different rules for revocable and irrevocable trusts. Under the new rules, both types of accounts are treated the same.
The new rules have greatly simplified how trust accounts are insured. Here’s how it works:
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Revocable and irrevocable trusts are insured up to $250,000 per beneficiary, per FDIC-insured bank.
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Accounts may be insured for up to five beneficiaries, with a total coverage limit of $1,250,000. Each grantor is also insured up to $250,000.
Trust account holders at FDIC-insured banks should review their insurance coverage before the new rules come into effect. Overall, the new rules will make understanding FDIC insurance of trust accounts easier and could increase the insured amount for account holders.