FDIC deposit insurance

Federal deposit insurance is the most important consumer protection in U.S. banking. It converts the unsecured claim a depositor holds against a bank (see deposits, reserves, and money creation) into a federally guaranteed entitlement, payable promptly if the bank fails. The guarantee underwrites the entire retail-deposit system: without it, ordinary depositors would have to evaluate the solvency of their banks, and a system of small dispersed institutions would not be politically or economically sustainable.

This article describes how the FDIC's insurance works in practice: what the standard maximum deposit insurance amount is, what counts toward it, what the ownership categories are and how to use them, what is not insured, and what happens when an insured bank fails. The legal text lives at 12 CFR Part 330; the most accessible summary is the FDIC's brochure Your Insured Deposits, refreshed periodically and available on the FDIC's website.

The basic rule

The standard maximum deposit insurance amount (the SMDIA) is $250,000 per depositor, per insured bank, per ownership category, as of May 2026. The $250,000 figure was raised from $100,000 on a temporary basis in October 2008 and made permanent by the Dodd-Frank Act in July 2010. The amount has not changed since; it can be adjusted by Congress at any time.

Each clause in the rule does work.

Per depositor. The insurance attaches to the legal account-holder. If you hold a single-ownership account with $300,000 in it, $250,000 is insured and $50,000 is uninsured, regardless of how many beneficiary designations you have added.

Per insured bank. The insurance is per bank charter, not per branch. Two accounts at the same bank — say, one at the East Side branch and one at the West Side branch — are aggregated for insurance purposes. Two accounts at two different banks, each up to $250,000, are each fully insured. The same applies if one institution operates under two trade names but a single underlying charter: aggregation runs at the charter level.

Per ownership category. A single depositor at a single bank can have substantially more than $250,000 of insured deposits by holding accounts in different ownership categories: a single account, a joint account, a revocable trust, an IRA, and so on. Each category has its own separate $250,000 cap. This is the principal mechanism by which depositors increase coverage beyond the headline figure.

The ownership categories

The FDIC recognizes eight ownership categories under 12 CFR Part 330. The five that matter most for individual consumers are:

1. Single accounts. Accounts owned by one person, including business sole-proprietorship accounts and accounts held in a payable-on-death form with no beneficiaries named. Insured up to $250,000 per owner per bank, aggregating all single accounts.
2. Joint accounts. Accounts owned by two or more natural persons with equal withdrawal rights. Each co-owner's share is insured up to $250,000, and the FDIC presumes equal ownership absent contrary documentation. Two joint owners thus get up to $500,000 of joint coverage at a single bank; three joint owners up to $750,000.
3. Certain retirement accounts. IRAs (traditional, Roth, SEP, SIMPLE), self-directed Keogh accounts, and Section 457 plan deposits at insured banks. Insured up to $250,000 per owner per bank, aggregating across multiple IRAs of the same type. A bank IRA holding deposits or CDs is covered; the tax wrapper does not change the insurance category. See IRAs at a bank.
4. Revocable trust accounts (including payable-on-death and "in trust for" accounts). Insured based on the number of unique eligible beneficiaries. Under the revised rule that took effect on April 1, 2024, the coverage formula was simplified: a revocable trust account is now insured up to $250,000 per beneficiary, with a cap of $1,250,000 per owner per insured bank (i.e., five beneficiaries' worth of coverage maximum). The 2024 change eliminated the prior distinction between revocable trusts with one to five beneficiaries and those with six or more. See accounts after a death.
5. Irrevocable trust accounts. Treated under the 2024 rule on the same per-beneficiary formula as revocable trusts, with the same $1,250,000-per-owner cap.

The other ownership categories — employee benefit plan accounts, corporate / partnership / unincorporated association accounts, and government accounts — are less relevant to ordinary retail depositors. The FDIC's Electronic Deposit Insurance Estimator (EDIE) tool is the canonical way to verify coverage on a specific account structure; for any large or unusual structure, depositors should verify directly with the FDIC or the bank.

What is insured

FDIC insurance covers deposit obligations of an insured bank: checking accounts, savings accounts, money market deposit accounts (the deposit kind, not money market mutual funds), certificates of deposit, and cashier's checks, money orders, and other official items issued by the bank. The insurance covers principal plus interest accrued through the date of the bank's failure, up to the applicable limit. Both U.S.-dollar and foreign-currency deposits at an insured bank are covered up to the same limit, with foreign-currency deposits converted to dollars at the closing date for payout.

The insurance does not cover non-deposit products. The list of non-deposit products is precise and important:

• Stocks, bonds, mutual funds, and other securities held in a brokerage account, even if the brokerage is a subsidiary of an insured bank;
• Money market mutual funds (not the same as money market deposit accounts);
• Annuities, life insurance, and other insurance products;
• U.S. Treasury securities, which are obligations of the U.S. government and not of the bank — Treasuries are not at risk if the bank fails, but they are also not "FDIC-insured";
• Contents of a safe deposit box, which the bank holds as a bailee but does not insure;
• Losses from theft or fraud — different consumer protections apply (Regulation E for unauthorized electronic transfers, Regulation Z for credit-card disputes), but FDIC insurance is not the mechanism. See disputing a fraudulent transaction.

Pass-through coverage and sweep arrangements

A growing share of consumer "bank" relationships sit not directly at an insured bank but at a non-bank that sweeps customer funds into one or more partner banks. Examples include neobank checking products that sweep into a partner bank, brokerage cash management accounts that sweep into a roster of bank-deposit programs, and sweep features that distribute balances across multiple banks to extend the FDIC limit.

The FDIC's pass-through coverage rule allows funds held by a non-bank custodian on behalf of an underlying owner to receive FDIC insurance up to the limit per owner per bank, provided three conditions are met: the account is custodial, the books of the bank disclose that the account is held for the benefit of others, and the records of the custodian identify the actual owners and their interests. The conditions are easier to state than to verify in practice; the 2024 Synapse collapse made the operational fragility of pass-through arrangements visible. See challenger banks and neobanks and banking-as-a-service.

For a consumer relying on pass-through insurance, three things matter: that the partner bank is actually FDIC-insured (verifiable on the FDIC's BankFind tool); that the agreement between the consumer and the non-bank establishes a custodial relationship with proper recordkeeping; and that the consumer is not simultaneously holding deposits at the same partner bank directly, which would aggregate against the same $250,000 cap.

The mechanics of payout

When the FDIC takes a bank into receivership, depositors with insured balances are typically made whole within one to three business days. The FDIC's strong preference is to find an acquiring bank that takes over the failing bank in a purchase-and-assumption transaction; the acquiring bank opens for business under the same building, with the same accounts, on the next business day. From a depositor's standpoint, the experience is typically a notice of the change of institution and continued access to funds.

If no acquirer can be found, the FDIC pays out insured balances directly. Insured depositors receive a check or an electronic transfer for the insured amount; uninsured depositors become unsecured general creditors of the failed bank's receivership estate and may recover some portion of their uninsured balance from liquidation proceeds, over months or years.

In a small number of extraordinary cases, the FDIC has invoked the systemic-risk exception under §13(c)(4)(G) of the Federal Deposit Insurance Act to extend coverage to uninsured depositors when failure to do so would create systemic instability. The exception requires concurrence of the Treasury Secretary (in consultation with the President), two-thirds of the FDIC Board, and two-thirds of the Federal Reserve Board. It was invoked in March 2023 to protect uninsured depositors at Silicon Valley Bank and Signature Bank — see 2023: SVB, Signature, First Republic. The exception is not the rule; uninsured depositors at most failed banks do not receive this treatment.

The deposit insurance fund

The FDIC's insurance is funded by assessments on insured banks, paid into the Deposit Insurance Fund. The DIF's target reserve ratio is set by the FDIC Board (currently 2.0% of insured deposits, with a statutory minimum of 1.35%); after a period of depletion following the 2008–2009 crisis, the fund was restored above the statutory minimum, then depleted again by the 2023 failures, which triggered a special assessment on banks with more than $5 billion in uninsured deposits. The fund is backed by the full faith and credit of the United States by statute, but in practice it has been self-financing through bank assessments throughout its history.

Limits and uncertainty

The $250,000 SMDIA, the ownership categories, and the pass-through coverage rules are stable as of mid-2026. Live questions include whether Congress will raise the SMDIA in response to the 2023 failures (proposals have been made; none has been enacted as of this writing), whether the FDIC will further reform the pass-through coverage rule in light of the Synapse collapse, and how the FDIC will manage future systemic-risk exception invocations. Any depositor with a balance close to or above $250,000 in any single ownership category at any single bank should re-verify coverage against the FDIC's current published guidance; the rule's stability does not relieve the depositor of the responsibility to apply it correctly to their specific facts.