FDIC insurance limits: When $250,000 isn’t the real number

If an FDIC-insured bank fails, the FDIC pays back your deposits up to $250,000 per depositor, per insured bank, in each ownership category, either by moving your account to a healthy bank or by paying you directly. Because the categories are counted separately, one household can have far more than $250,000 fully insured at a single bank, while money above the limit in any one category is exposed. Since the FDIC began operations in 1934, no depositor has lost a penny of insured deposits, according to the agency.

How the $250,000 limit is counted

Three phrases in the rule do the work. “Per depositor” means each person has a separate limit. “Per insured bank” means each separately chartered bank: two branches of the same bank count as one bank, and so do two brand names that one bank operates under. When two banks merge, the FDIC keeps deposits from the acquired bank separately insured for at least six months, which gives you time to rearrange. “Per ownership category” is what allows larger sums at one bank. These are the categories that matter for most households:

• Single accounts: everything one person owns alone at the bank (checking, savings, CDs) is added together and insured up to $250,000.
• Joint accounts: the co-owners must be living people with equal rights to withdraw. Each co-owner’s shares of every joint account at that bank are added together and insured up to $250,000. Unless the bank’s records say otherwise, the shares are equal.
• Certain retirement accounts: deposits held in traditional and Roth IRAs, SEP and SIMPLE IRAs, and self-directed 401(k) and Keogh plans are added together and insured up to $250,000 per owner, however many beneficiaries are named. Only the deposit part counts; stocks or mutual funds bought inside the IRA are not deposits.
• Trust accounts: since April 1, 2024, payable-on-death (POD) accounts, living trusts and irrevocable trusts share one category. Each owner is insured for $250,000 per eligible beneficiary, counting at most five, so the ceiling is $1,250,000 per owner per bank no matter how many beneficiaries are named.

Business, employee benefit plan and government accounts have categories of their own. Insurance covers principal plus interest accrued through the day the bank closes, up to the limit.

A household example, worked through

Take a married couple with $950,000 at one bank: $200,000 in a savings account in Ana’s name alone, $600,000 in a joint money market deposit account, and $150,000 in CDs held inside Ana’s IRA.

• Ana’s single account is under $250,000, so all $200,000 is insured.
• The joint account counts as $300,000 for each spouse. Each share is insured up to $250,000, so $500,000 is covered and $100,000 ($50,000 of each share) is not.
• The IRA CDs sit in the retirement category, so all $150,000 is insured.

Total: $850,000 insured and $100,000 exposed. The fix costs nothing. If they move $100,000 out of the joint account into an account in her husband’s name alone, the joint balance drops to $500,000 ($250,000 per spouse) and his new single account is fully covered, because he had no single account at that bank before. Naming their two children as POD beneficiaries on the joint account would also work: a joint account with beneficiaries is insured in the trust category, where each owner gets $250,000 per beneficiary, or $1,000,000 for two owners and two children.

The trust cap catches more people than the joint rules do. A widower with $1,400,000 in a living trust that names his three children is covered for 3 x $250,000 = $750,000 at that bank, which leaves $650,000 uninsured. Five or more eligible beneficiaries (people, charities or other nonprofits) would raise his coverage to the $1,250,000 maximum, and the last $150,000 would still need a second bank. The FDIC’s Electronic Deposit Insurance Estimator (EDIE) runs this arithmetic for your own accounts.

What the FDIC covers and what it does not

Covered: checking accounts, savings accounts, money market deposit accounts, CDs, and cashier’s checks, money orders and other official items issued by the bank.

Not covered, even when you buy them at a bank branch: stocks, bonds, mutual funds (money market mutual funds included), annuities, life insurance, municipal securities, crypto assets, and whatever you keep in a safe deposit box. A safe deposit box is storage, not a deposit, so cash or gold inside it has no FDIC protection. U.S. Treasury bills and bonds are not FDIC-insured either; they are debts of the federal government itself.

Fintech apps and the Synapse lesson

An app that holds your money is not a bank, even when its debit card says “FDIC insured.” The FDIC’s guidance on third-party apps says nonbank companies are never FDIC-insured, and money you send to one becomes eligible only after the company places it at an insured bank and certain conditions are met. Those conditions, known as pass-through coverage, require the bank’s records to show that the money is yours and how much of it is yours. Even then, the insurance pays only if the partner bank fails. It pays nothing if the app, or a company sitting between the app and the bank, goes bankrupt.

That gap stopped being theoretical in April 2024, when Synapse, a technology company that connected fintech apps to partner banks, filed for Chapter 11. According to the CFPB, consumers had no access to their funds for weeks or months while the banks reconciled records, and the banks found a shortfall of $60 million to $90 million between what they held and what Synapse’s records said customers owned. No bank failed, so deposit insurance never came into play.

Before keeping more than a small balance in an app, find the partner bank’s name in the app’s terms, confirm that bank in the FDIC’s BankFind Suite, and check whether the terms say your money sits in a custodial account held for customers.

What happens when a bank fails

The bank’s chartering regulator closes it and the FDIC takes over as receiver. Usually the FDIC arranges for a healthy bank to take over the deposits, and your account, card and checks move to the new bank. If no buyer steps in, the FDIC pays insured depositors directly, by check or by opening an account for them at another insured bank; the agency says these payments usually begin within a few days of the closing.

Money above the limit is treated very differently. For that amount you become a creditor of the failed bank and receive a receivership certificate. You are paid dividends as the FDIC sells the bank’s assets, sometimes starting with an advance dividend in the first weeks, and full recovery is not promised.

The 2023 failures are a poor guide to what you should expect. Silicon Valley Bank, which failed in March 2023 with about $209 billion in assets, is the third-largest bank failure in U.S. history, after Washington Mutual in 2008 and First Republic in May 2023. After SVB and Signature Bank closed, regulators invoked a systemic risk exception to protect every deposit at both banks, uninsured ones included. That was a decision made for those two banks, not part of the insurance, and no law obliges regulators to repeat it.

Who pays for the insurance, and has the fund run short?

The Deposit Insurance Fund is paid for by insured banks through quarterly assessments, not by tax revenue, and insured deposits are backed by the full faith and credit of the United States. The fund has run short before. It went negative during the 2008 crisis, bottoming at minus $20.9 billion at the end of 2009, and turned positive again only in the second quarter of 2011, according to FDIC reports. Insured depositors were paid in full throughout. If the fund needs cash, the FDIC can also borrow up to $100 billion from the Treasury.

How to check and fix your own coverage

1. Confirm the institution. Search the bank’s exact legal name in BankFind, not the app or brand name. A credit union is insured by the NCUA instead, also up to $250,000 per member, per credit union, per category. One difference matters right now: the NCUA’s version of the five-beneficiary trust rule takes effect on December 1, 2026, so credit union trust accounts follow the older NCUA rules until then.
2. Add up each category at each bank, including interest. The FDIC’s deposit insurance pages link to EDIE, which prints a coverage report.
3. Move whatever is over the limit. Send the excess to a separately chartered bank, use a category you are not using yet (a spouse’s single account, beneficiaries on a trust or POD account), or ask your bank whether it uses a deposit placement network that spreads large balances across several insured banks.
4. Treat one-time windfalls as urgent. Proceeds from selling a house are the usual case: $800,000 sitting in one single-owner account leaves $550,000 uninsured, while four banks holding $200,000 each would cover all of it.