What is FDIC Insurance? The FDIC Insurance, or simply bank insurance, is meant to preserve and promote public confidence in the U.S. financial system by: (1) insuring deposits in banks and thrift institutions for at least $250,000, (2) identifying, monitoring and addressing risks to the deposit insurance funds, and (3) limiting the effect on the economy and the financial system when a bank or thrift institution fails.
The FDIC Insurance was established by the Federal Deposit Insurance Corporation (FDIC), an independent agency of the federal government created in 1933 in response to the collapse of the banking industry in the 1920s and early 1930s. Since the start of FDIC insurance on January 1, 1934, no depositor has lost a single cent of insured funds as a result of a failure. You can learn more about FDIC by visiting the web site at www.fdic.gov.
First, not all financial institutions are FDIC insured. If your bank is not an FDIC bank, your best bet is to take your money elsewhere. If your bank is an FDIC member, the combined amount in your savings, checking, NOW, money market accounts, and certificates of deposit are protected up to $250,000 per depositor per bank. There are a few exceptions that you should read on the FDIC INFO web site.
The FDIC does not insure money invested in stocks, bonds, mutual funds, life insurance policies, annuities, or municipal securities, even if these investments were bought from an insured bank. But you are not completely out of luck here either:
Additionally, the FDIC does not insure U.S. Treasury bills, bonds, or notes. These are backed by the full faith and credit of the United States government.
If your bank fails, FDIC will step in and make sure your money will be there. The FDIC pays insurance within a few days after a bank closing either by establishing an account at another insured bank or by providing a check. However, it may takes longer if the failure is a large and messy one.