Say I have, for arguments sake, $400,000 I want to put into CDs in the US. As far as I can tell, no bank insures under FDIC for more than $100,000. Would I really have to divide my money between at a minimum of 5 banks (to have the principal and short-term interest earnings covered by FDIC insurance), or are there banks which have insurance for more than $100,000 per person?
I’ve wondered this myself. I think it would be unnecessary to do this at a bank like West Fargo or Bank of America, you know, the big names. However, if you are banking at a small time bank, it is possible the bank could go bankrupt and you would lose those 300Gs.
The hundred K limit is per acct., not per institution. If you had 100K in savings and 100K in a CD and another 100K in checking, they would each be covered. It’s probably not something you should be particularly concerned about.
Unless they are in seperate accounts.
You can also get around the per institution cap by having accounts with different types of ownership. IE sole ownership, joint ownership, POD etc.
I don’t think this is correct (cite). The limit is per “depositor” and per bank. Joint accounts, retirement accounts, and some other account types may be treated as separate “depositors” (see here), but five different CDs, all in the name of or otherwise held solely by “U. Persson,” would all be under the same 100K umbrella.
I stand corrected. I see this statement:
Single Accounts
These are deposit accounts owned by one person and titled in that person’s name only. All of your single accounts at the same insured bank are added together and the total is insured up to $100,000. For example, if you have a checking account and a CD at the same insured bank, and both accounts are in your name only, the two accounts are added together and the total is insured up to $100,000.
From here: FDIC: Understanding Deposit Insurance
That’s about what I thought. It seems silly that you’d have to split the money up between so many banks. What do rich folks who, for whatever reason, want to keep $10,000,000 in bank accounts do?
FTR, I don’t have $400,000 to put into CDs, so this wasn’t a subtle way of bragging or doing something assholic. This was a hypothetical question.
Get their heads examined. 
Someone with that much money will normally have it invested in something that pays better than whatever a CD gets these days. Of course, higher yields are accompanied by higher risks. For long-term “insurance” it’s tough to beat US Treasury bonds. Yield is in the area of 3.5%, but the value is guaranteed to go up, unlike stocks, which can, and often, decrease in value.
They buy their own, private deposit insurance. If you want to put a lot of cash in a CD or savings account, ask the bank if they offer private deposit insurance for amounts in excess of $100k. I have no idea how much it costs.
Related question: What do big lottery winners do? How do they get access to their money, initially? Where does it live while they are choosing investments?
As far as I know, they just get a check. If they choose an annuity plan they get one every year. They can deposit that in any account they like and then invest it, or deposit it directly with their brokerage, or sign it over to a money manager, etc.
ETA: I’m pretty sure the big cardboard check is just for show. 
So, you’re saying that until they get it sorted out as to where they will invest, their money would be uninsured?
One more reason I don’t by lottery tickets. 
Well, if a person is older, and is looking only for maintaining their standard of living, and never, ever want to think twice about the stability of their source of income, then keeping a large amount of cash could be handy. Even a rich wheeler-dealer type person might have that much cash handy for sudden purchases of things.
I called my bank this morning (Bank of America) and asked about private deposit insurance. They told me it was a “scam” that “people on the web” do to “steal your identity”, and that what I really needed to do was talk to their investment counselors. :rolleyes: I was pretty sure they really didn’t know what I was talking about.
I can get 5.2% CDs right now at my bank, and higher amounts online and in the UK. That’s a lot more than 3.5%.
I work in the insurance business, and I’ve never heard that there was much of a market for private deposit insurance, either for banks or for individuals. Googling turns up a number of references, but all of them seem to date from the early 1990’s, when the savings and loan crisis was still a recent memory.
From an insurer’s standpoint, this coverage is difficult to price—you can go years without any bank failures, and then all of a sudden there are a lot of them. You have to monitor the financial health of banks and stop writing (or even cancel) coverage when a bank gets in trouble, which is the only time when people want the insurance. And, it’s hard to compete with the government—people can get “free” (to the depositor) deposit insurance by splitting up large accounts into $100,000 blocks. If you’re so wealthy that this is impractical, your portfolio should be diverse enough that a single bank failure won’t be that big a deal.
I’m sure that somebody, somewhere will insure your deposit, but it may take some hunting to find them, and the price may not be one which you wish to pay.
The other thing is that if the situation is so bad that banks are failing left and right, are the insurers going to be stable enough to cover the private insurance policies?
I would have to disagree with you on the private insurance. I have worked in Banking for many years and beyond scams I have never seen truly private insurance for bank deposits. In the 90’s, several “private” deposit insurance providers failed, but these were only private in the sense that they were cooperatives of the banks that were covered. In any case, these companies insured institutions not individuals. Most of these companies were for specific state chartered banks or credit unions. As far as really rich people making deposits over the limits most of these people either get their deposits secured by a lien on specific assets such as bonds or they are secured through a network like Promontory’s CDARS product which exchanges deposits between banks to keep the individual under the limits.
Schwab offers a service where you can purchase CDs from many banks. I have always wondered how FDIC applies in this case (It doesn’t really matter in my case, so I never asked). Are all your separate CDs summed for purposes of FDIC, or are they treated separately?
THe FDIC insurance is a per institution and then per person, assuming each bank is FDIC insured then each account would be covered.
They’re treated separately. I meant to mention that–that’s another option if you’re wealthy and wish to keep a lot of money in CD’s. A broker such as Schwab can spread them among a large number of banks for a small fee. This is one more reason why I believe that the market for private deposit insurance, to the extent that it exists at all, is rather embryonic.