What Happens When the Increased FDIC Insurance Limits Expire?

Written by Nickel - 10 Comments

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Earlier this fall, FDIC insurance limits increased from $100k to $250k. But guess what? That increased FDIC coverage is set to expire on 12/31/2009. Thus, assuming that these changes aren’t extended or made permanent, the coverage limits will fall back to their original values in just over a year. With that in mind, a reader named Dale recently asked the following question:

If I get a five year certificate of deposit (CD) for more than $100k (but less than $250k), will this CD be covered in full for the full five years by the FDIC? Or will the extended coverage expire in Dec 2009?

That’s a great question. Unfortunately for Dale, his CDs will only be protected by the higher limits until the end of December 2009. At the point, the coverage will fall back to $100k. According to an FDIC press release:

“…all the deposits a consumer has at a bank in his or her name alone will be fully insured up to $250,000 through December 31, 2009. After that date, the depositor will only be insured up to $100,000, with any balance over that limit becoming uninsured.”

Expanding your FDIC limits

The good news is that you can actually stretch your limits beyond the basic coverage amounts by employing additional ownership categories. Because coverage is determined on a “per depositor” basis, jointly held accounts qualify for twice the coverage. On top of that, accounts held in different ownership categories are separately insured.

In light of the above, it’s actually possible for a married couple to protect up to $1M at a single bank — i.e., they can individually hold $250k apiece plus a join account of $500k. Even after the coverage limits revert to their previous levels, they’ll be left with $400k in protection ($100k apiece plus $200k in a joint account).

Published on December 9th, 2008 - 10 Comments
Filed under: Banking
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About the author: Nickel is the founder and editor-in-chief of this site. He's a thirty-something family man who has been writing about personal finance since 2005, and guess what? He's on Twitter!

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Comments (scroll down to add your own):

  1. A couple can further increase their FDIC coverage by each opening single name accounts that are “payable on death” to the other. That’ll give them $1.5 million ($600,000 under old limits).

    Comment by Dylan — Dec 9th 2008 @ 7:40 am

  2. Yea. Dylan is right.

    Great informational post though. Sure taught me some new things.

    Comment by Trevor — Dec 9th 2008 @ 9:59 am

  3. The options of additional ownership categories and adding beneficiaries to the account are ways to extend the FDIC coverage. However, if any little of the paperwork is mistitled or mishandled, then the additional coverage could be voided.

    The easiest way to secure up to $50 million is coverage to deposit your money into a bank that participates in the CDARS program.

    Comment by Blue Owl Finance — Dec 9th 2008 @ 1:30 pm

  4. Very interesting, didn’t think about it because I have no reason to, not in that type of league. For a single person, wouldn’t it just be easier to have separate accounts for 100K to make sure there won’t be a problem?

    Comment by Craig — Dec 9th 2008 @ 2:44 pm

  5. Craig: You’d have to have separate accounts at different institutions for this to work. The limits are per account holder per institution, so just opening multiple accounts at one bank doesn’t help unless they have different ownership types.

    Comment by nickel — Dec 9th 2008 @ 2:46 pm

  6. Nickel: Got it, thanks, wasn’t sure how exactly that worked. Wished I was in a position where that would be an issue, ha.

    Comment by Craig — Dec 9th 2008 @ 2:48 pm

  7. watch out for subsidiaries

    Comment by Tim — Dec 9th 2008 @ 3:51 pm

  8. I think the idea behind the expiration, is that consumer confidence will return, and the banks will be in better shape, so that the FDIC won’t really be a concern on most peoples minds, as it wasn’t really before the current recession.

    Comment by Nick — Dec 10th 2008 @ 5:19 pm

  9. How can a not for profit organization get around the $250,000.00 limits on the FDIC coverage?

    Comment by Edward Sedawie — May 8th 2009 @ 2:09 pm

  10. Edward – a non-profit (and any consumer) can open a bank account in any bank in Massachusetts that is a member of the Depositers Insurance Fund (DIF) that accepts non-resident accounts. These accounts are insured in unlimited amounts above and beyond the FDIC-insured ceiling.

    Comment by Mark — Jun 4th 2009 @ 11:05 am

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