Silicon Valley Bank’s failure continues to be a hot topic on the major networks. Bank failures are uncommon. According to the FDIC, there have been 563 bank failures from 2001 – 2023. Most of those failures occurred in 2008 – 2010.
The question the media frenzy is leaving investors with is: What happens if my bank fails, too?
What is FDIC insurance?
The good news is that depositors are protected to an extent by FDIC insurance. The Federal Deposit Insurance Corporation (FDIC) is a government agency that protects Americans against the loss of their deposits in the event their bank fails.
Deposit insurance is automatic if the bank is FDIC insured. The standard amount of coverage is $250,000, per depositor, per ownership category. Deposit insurance is calculated dollar-per-dollar and includes principal plus any interest (as long as the total amount falls within $250,000).
The following deposit accounts are eligible for FDIC insurance:
- Checking accounts
- Savings accounts
- Money market deposit accounts (MMDA)
- CDs
Additionally, the following account ownership types are eligible for FDIC insurance:
- Single accounts
- Joint accounts
- Certain retirement accounts (IRA, ROTH IRA, SEP IRA, SIMPLE IRA)
- Trust accounts – revocable and irrevocable
- Corporations, partnerships, and associations
- Employee Plan account
Taking the above into consideration, you’re technically eligible for more than $250,000 of coverage at one institution if you have various types of accounts and/or ownerships.
| Account Balance | Type of Account | Insured Amount |
| $250,000 | Singly owned CD | $250,000 |
| $1,000,0000 | Joint savings account | $250,000 |
| $350,000 | Single cash IRA | $250,000 |
| $1,550,000 | Total | $750,000 |
Additionally, trust accounts naming multiple beneficiaries can also be eligible for more coverage – click here to learn more about those limits.
What happens if a bank fails?
According to the FDIC’s website, the FDIC will pay depositors up to their insurance limit by providing either a new account at a different bank or by issuing a check. The payments are typically made within days of a bank’s failure.
The FDIC is also responsible for collecting and selling all of the failed bank’s assets and settling any debts. If depositors have more than the insurable amount in an account, the FDIC could potentially recover some of those funds from the proceeds of selling bank assets. However, this could take years and the payments can be inconsistent.
Can you get additional FDIC insurance?
Yes, here are two possible ways to get additional coverage:
- IntraFi Cash Service (ICS) and CDARS
- Provides the ability to access FDIC insurance at several banks by just making one deposit at a single bank.
- Deposits can be allocated to checking/savings, money market deposit accounts (MMDA), or CDs.
- Deposits are placed in a network of banks all under the FDIC limit and reporting is aggregated at the one primary institution for ease of use.
- Depositors Insurance Fund (DIF)
- Only eligible at savings banks chartered in MA.
- Several DIF member banks have branches in neighboring states which are also fully covered.
- Private, industry sponsored insurance fund.
- Insures all deposits above FDIC limit – no limits at no additional cost.
- Only eligible at savings banks chartered in MA.
Bank failures are uncommon, but with the recent failure of Silicon Valley Bank, it never hurts to educate yourself on how your funds are protected. A wealth advisor can help you assess your accounts and make recommendations on how to make the most of FDIC insurance. Contact a Marshall wealth advisor today.
