Increasing Your FDIC Coverage

Banks are very strong financial institutions. They could function and exist for centuries without even going down despite dwindling economic conditions. Banks know how to adapt to any economic situation and should be able to rise above the problem and create a workable solution fast. A bank will rarely fall and will always protect their customers or depositors above else.

But even though banks are strong, they are still susceptible to different factors which could bring them down for good. Recent news in the investment world has scared a lot of investors and depositors. Warren Buffet, the country’s richest person was surpassed by Bill Gates in the recent stock market crash because the value of his shares significantly went down.

A bank could be easily affected by these and they could close down if they are unable to adapt or seek solutions fast. They might close down for good.

Fortunately, you don’t have to fear that your deposited money would end up in nothing. The FDIC was set up to protect up to $100,000 of each depositor’s money, in any form of deposit. If your bank falls with your $100,000 in it, expect the FDIC to step in and help you recoup all your money.

But what if you have more than $100,000 deposited in your bank? Unfortunately, the FDIC will not help you beyond $100,000. The only way FDIC could cover more than $100,000 is when your account is for the retirement account such as ROTH or 401(k). In this case, the FDIC covers up to $250,000. Other than that, you can never be covered by the FDIC.

That doesn’t mean everything more than $100,000 should be kept in your personal safe. The FDIC purposely left a loophole in that decree so that it could increase its coverage for non-retirement accounts.

The solution to your coverage problem is by establishing different accounts. The FDIC will only cover of up to $100,000 per person and per account. That means if you have $100,000 in your savings account and $100,000 in your checking account, you will be covered full in both accounts. Two totally separate accounts under the same name and under the same back will both be covered by the FDIC.

But financial advisors will usually recommend different depositors to use only $100,000 per bank. This is to avoid confusion which could happen if the bank falls and records will be handed over to the FDIC. Your savings and your checking account could be easily confused if they have the same amount. Worst, the other account could be deleted because of duplication.

If you’re hesitant to try other banks, you just have to research more until you find the bank you prefer. But you have to do it fast because given the current fiscal situation of some well known financial institutions; a bank could just close without proper notice to its depositors.

There’s also another way to increase coverage from the FDIC. You don’t even have to set-up two different accounts. Set-up a trust fund with two beneficiaries or more which will amount to $100,000 each. The FDIC will cover each amount as long as the beneficiaries are specified.

Although a trust fund is currently in your name, you technically don’t own them since they are already given up for someone else and will only be given to them at the appointed time. The FDIC will acknowledge that each is already on separate account with different beneficiaries.

In the current financial situation, it’s best to be protected as much as possible. Move your deposit in a safer state so that you won’t be worried of the consequences of drastic changes.