FDIC Insurance Explained: Your $250,000 Safety Net

After Silicon Valley Bank and Signature Bank failed in 2023, millions of Americans suddenly wanted to understand FDIC insurance. What's covered? What's not? And most importantly: is your money safe?

The good news: if your deposits are at an FDIC-insured bank and under the coverage limits, your money is as safe as it gets. Here's how it all works.

What Is FDIC Insurance?

The Federal Deposit Insurance Corporation (FDIC) is an independent government agency created in 1933 during the Great Depression. Its purpose: restore confidence in American banks by guaranteeing deposits.

When you put money in an FDIC-insured bank, the federal government guarantees you'll get it back—even if the bank fails completely. This isn't a promise or a policy; it's backed by the full faith and credit of the United States.

Current FDIC Coverage Limits

The standard coverage limit is $250,000 per depositor, per insured bank, per ownership category. That last part—"ownership category"—is important and often misunderstood.

Ownership Categories Explained

Coverage Stacking Example

A married couple at a single bank could have up to $1,500,000 in FDIC coverage:

What's Covered by FDIC Insurance?

Covered:

• Checking accounts
• Savings accounts (including high-yield savings)
• Money market deposit accounts (MMDAs)
• Certificates of deposit (CDs)
• Cashier's checks issued by the bank
• Money orders issued by the bank

NOT Covered:

• Stocks, bonds, or mutual funds
• Cryptocurrency
• Life insurance policies
• Annuities
• Contents of safe deposit boxes
• U.S. Treasury securities (already backed by U.S. government)

What Happens If Your Bank Fails?

Bank failures are rare but do happen. When a bank fails, the FDIC typically steps in immediately—often over a weekend—to minimize disruption.

The typical process:

1. Friday evening: Regulators close the failing bank
2. Over the weekend: FDIC arranges for another bank to acquire the failed bank's deposits
3. Monday morning: Customers can access their money at the new bank (or the same branches under new ownership)

In most cases, you don't even need to do anything. Your accounts simply transfer to the acquiring bank automatically.

If no acquirer is found, the FDIC will mail you a check for your insured deposits within a few business days. You'll receive interest up to the day of failure.

How to Check If Your Bank Is FDIC-Insured

Every bank advertises its FDIC membership (it's a selling point), but you can verify independently:

1. Visit FDIC BankFind
2. Enter the bank's name
3. Confirm it appears in the results with an active status

All banks featured on SideBySide Savings are FDIC-insured. We verify this before including any institution in our comparisons.

Maximizing FDIC Coverage Beyond $250K

If you have more than $250,000 in savings, you have several options to maintain full FDIC protection:

Option 1: Multiple Banks

The simplest approach: spread your money across multiple FDIC-insured banks. Each bank provides a separate $250,000 of coverage.

Downside: Managing multiple accounts can be cumbersome.

Option 2: Ownership Categories

As shown above, different ownership categories (individual, joint, trust) each get separate coverage at the same bank.

Downside: Requires careful account structuring and documentation.

Option 3: Sweep Account Networks

Several fintech companies automatically spread your deposits across multiple partner banks, each providing up to $250,000 in coverage:

These work by splitting your deposit into $250,000 chunks and placing each chunk at a different partner bank. You see one account; behind the scenes, your money is distributed across 20-30+ banks.

FDIC vs NCUA vs SIPC

You might see other insurance acronyms. Here's how they differ:

FDIC and NCUA both cover $250,000 per depositor and function similarly. SIPC is different—it protects against broker failure (your stocks disappearing), not market losses.

Common FDIC Misconceptions

Myth: "Online banks aren't as safe as traditional banks"

Reality: FDIC insurance works identically for online and traditional banks. Ally Bank deposits are just as protected as Chase deposits.

Myth: "The FDIC can run out of money"

Reality: The FDIC fund is backed by the full faith and credit of the U.S. government. Even if the fund were depleted, the Treasury would step in.

Myth: "I need to file a claim if my bank fails"

Reality: The FDIC handles everything automatically. You typically don't need to take any action to recover insured deposits.

Frequently Asked Questions

How long does it take to get my money back if a bank fails?

Usually within 1-2 business days if another bank acquires the failed bank (most common). If not, the FDIC mails checks within a few days.

Does FDIC cover interest earned?

Yes, up to the coverage limit. You'll receive interest earned through the day of failure.

What if I have more than $250,000 in one account?

Only $250,000 is insured. The excess amount is at risk in a bank failure, though you may eventually recover some or all of it from the failed bank's assets.

Are CDs covered by FDIC?

Yes, CDs are fully covered up to $250,000 like any other deposit account.

Is my money safe at neobanks like Chime or Varo?

Chime and Varo partner with FDIC-insured banks for deposits. Your money is held at these partner banks and is FDIC-insured. Verify the partner bank on the company's website.