FDIC Insured - What does it really mean?

[silenus]

My Dad asked me this tonight, and I really didn’t have a good answer for him. You always hear that savings, etc. are FDIC insured up to $100,000. Here’s the question: Is that per account, or per depositor? If I have a savings account, a checking account and a money-market account with Joe’s Bank, each with a balance of 100K, and Joe’s Banl goes tits-up, how much do I get from FDIC? 100K? 300K? And if there are multiple names on an account, say husband and wife, does that double the insurance to 200K?

[FatBaldGuy]

Here is a link to the FDIC’s web page on Your Insured Deposits

If you or your family’s deposit accounts at one FDIC-insured bank or savings association total $100,000 or less, your funds are fully insured. You can have more than $100,000 at one insured bank or savings association and still be fully insured provided your accounts meet certain requirements.

From the FAQ section:

Can I increase my insurance coverage by dividing my deposits into several different accounts at the same insured bank?
Deposit insurance coverage can be increased only if the accounts are held in different categories of ownership. These categories include single accounts, self-directed retirement accounts, joint accounts and revocable trust accounts. The requirements for obtaining separate insurance coverage in the ownership categories are explained elsewhere in this booklet.

Can I increase coverage for my joint accounts by using a different co-owner’s Social Security number on each account or changing the way the owners’ names are listed on the accounts?

  Using different Social Security numbers, rearranging the order of names listed on accounts, or substituting “and” for “or” in joint account titles does not affect the amount of insurance coverage available to co-owners of joint accounts. 

[Merhouse]

There’s more info than you probably want to know at The FDIC site, but here’s a paragraph that gives the basics:

“The FDIC calculates deposit insurance based on the type of ownership (“right and capacity”) in which funds are owned. All deposits (CDs, Checking, Savings) held in the same type of ownership are added together and insured to $100,000. Funds held in different types of ownership (Individual, Joint, Trust, Retirement) are separately insured.”

Hope this helps!

[groman]

Not to hijack, but does that mean that one can extend their FDIC insurance to $200,000 by just opening a second account jointly with a legal entity, say a “Groman Club”, a non-profit private club that only has me in it?

[Polycarp]

For a variety of reasons, including liability and FDIC, it may be advisable for a well-to-do person to create an LLC, in which a separate corporate “legal person,” of which the actual human person is the sole member, is established. If I were a millionaire named John Smith, for example, I might create Smith Holdings LLC, paying some state $200 or so to permit and register my LLC, and then put a $75,000 bank account and the clifftop land that I am holding for development into expensive residences when the market is right, into the ownership of Smith Holdings LLC. Therefore the maximum loss I’d be exposed to when some drunken college kid decides to dive off the cliff and his parents sue in his name is what Smith Holdings LLC owns, not my whole assets.

[Mr.Slant]

As an aside to anyone who has more than $100K on deposit at a financial institution, your institution may offer reasonably priced 3rd-party deposit insurance.
Meaning a depositor with $250K on deposit can pay a small premium to a 3rd party, who will then offer to indemnify his $150K in losses above and beyond the FDIC’s $100K ceiling.
I’d trust it for a single bank failure, but if banks were failing left and right I’d be less than trustful that any insurance company offerring this kind of product could remain liquid when it came time for me to file my claims.