Comments on: Getting to Know the FDIC

By: MG

MG — Thu, 16 Oct 2008 21:16:00 +0000

Hi Taryn, the FDIC did abolish the relationship rule on 9/26/08 – you can even be insured for non-profit organizations. They also did away with the rule regarding beneficiary percentages effecting insurance coverage – up to $500K.

By: Hypatia

Hypatia — Wed, 15 Oct 2008 18:46:00 +0000

How does the FDIC cover that if a bunch of big banks go? It’s mentioned that banks don’t keep the cash sitting around so they can invest it, does the FDIC have that cash sitting around? How does that work?

I’m an economic newbie!

By: Eli

Eli — Wed, 15 Oct 2008 16:09:00 +0000

Here’s the EDIE link:-).

By: Eli

Eli — Wed, 15 Oct 2008 16:07:00 +0000

Thanks to MG and Taryn for clearing up the confusion about FDIC Insurance and titling of accounts. You both beat me to it!
I work for a bank and with all the turmoil in the banking industry lately, we are being bombarded with questions from customers about their FDIC coverage. I suggest using the FDIC’s Electronic Deposit Insurance Estimator(EDIE). It’s an online tool that can help you determine your amount of coverage.Since links aren’t allowed, I couldn’t post it :-).

By: Taryn

Taryn — Wed, 15 Oct 2008 13:29:00 +0000

The POD insurance is actually per qualifying beneficiary per person.

Example: John and Diane have three PODs, their three sons. Coverage for John’s PODs is 750K and the same for Diane’s PODs for a total of 1.5 Million in coverage for all accounts that are titled the exact same way, i.e. John or Diane and POD Sons.

The reason it is this way is that each POD has a stake in each parents’ account funds.

John could open another CD with Diane and their three sons as POD and it would be insured for the PODs stake which is one million dollars total. 250K for each POD. Diane could do the same thing.

They could also open accounts with only one son as a POD and be insured separately or they could make each their PODs and still be covered separately.

It’s a confusing read, no doubt, but there’s always someone at your local bank who can explain everything to you. I do it everyday!

By: MG

MG — Tue, 14 Oct 2008 21:17:00 +0000

Great article but you’ve left a few things out.

First, the new $250K limit is in effect until 12/31/09. At that point they may reduce it back to $100K or renew extend the coverage.

Second, you can very well be insured for much more than $250K. The FDIC insures depositors per Ownership Category.

For a revocable trust account (either a family trust or informal trust stating direct POD beneficiaries) it is entitled to insurance coverage up to $250,000 for each beneficiary that the account owner designates in the revocable trust account.

For instance, if you have an account that lists 3 beneficiaries you will be insured to $750K. If you have an account which lists 10 beneficiaries you can be insured up to $2,500,000 regardless of the beneficiary’s relationship to you.

Unfortunately there is a lot of misinformation regarding insurance and most media outlets only state the $100K or $250K limit and don’t explain how depositors can be insured for more. In turn large numbers of depositors withdraw funds from institutions which can leave the banks closer to insolvency as you said.

The FDIC has a wealth of information at their website including an online calculator to determine your insurance coverage.