What FDIC insurance is

The Federal Deposit Insurance Corporation, the FDIC, is a US government agency that insures the money you keep in member banks. If an insured bank fails, the FDIC makes sure you do not lose your insured deposits. It was created in 1933 after waves of bank failures wiped out savers, and since then no depositor has lost a penny of FDIC-insured money.

The limit that matters: 250,000 dollars

The standard coverage is 250,000 dollars per depositor, per insured bank, per ownership category. Those three phrases each do work. Per depositor means per person. Per insured bank means the limit resets at a different bank. And per ownership category means different types of account, such as single accounts, joint accounts and certain retirement accounts, are each insured separately, even at the same bank.

What is covered, and what is not

Covered deposits include checking accounts, savings accounts, money market deposit accounts and certificates of deposit. What is not covered is just as important. Stocks, bonds, mutual funds, exchange-traded funds, crypto assets, life insurance and the contents of a safe-deposit box are not insured by the FDIC, even when you buy them through a bank. Those are investments, which can lose value, not deposits. Our explainers on stocks vs bonds and ETFs versus mutual funds cover why.

How to get more than 250,000 dollars covered

Because the limit applies per bank and per ownership category, you can insure more than 250,000 dollars without going uninsured. Spreading money across several insured banks gives each its own limit. Using different ownership categories, such as a single account and a joint account, adds coverage at the same bank. The FDIC publishes a free tool to calculate exactly how much of a given set of accounts is covered.

How it works when a bank fails

You do not apply for FDIC insurance; it is automatic at an insured bank, and you can check a bank's status on the FDIC website. If an insured bank fails, the FDIC typically arranges for another bank to take over the accounts, often so smoothly that customers barely notice, or it pays insured depositors directly, usually within a few business days. The point of the system is to stop the panic that turns one bank's trouble into a run on many, which is central to how banks make money in the first place.

Why the system exists

The FDIC was born out of disaster. In the early 1930s, thousands of American banks failed and ordinary savers lost everything, which deepened the Great Depression. Insuring deposits restored the one thing banking cannot run without: confidence. If people trust that their money is safe up to the limit, they have no reason to join a panic, and the panic that can topple an otherwise healthy bank is far less likely to start.

What recent failures showed

Modern bank failures have tested the system, and for insured depositors it has held. When a bank fails, insured deposits are protected up to the limit, but money above it is not automatically safe, even if regulators sometimes step in. That is the practical lesson: the 250,000 dollar limit is the line you can count on, so for balances well above it the safe course is to spread the money across banks or ownership categories rather than assume a rescue.

The bottom line

FDIC insurance protects up to 250,000 dollars per depositor, per insured bank, per ownership category, and it covers deposits, not investments. Know the limit, know which of your holdings are deposits and which are not, and spread large balances across banks or ownership types to stay fully covered. The glossary defines the terms.