Every time you put money into a bank account, you expect it to be there when you need to use it. Yet, before the 1929 Great Depression, that was not the case. Many people tried to pull money from their bank accounts only to find out that there wasn't any money to withdraw. Things have changed significantly since then. Now, there are numerous ways that your money can be insured, minimizing the risk to you.

What Is Deposit Insurance?

It is rare for banks to fail today. Even if they do, savings and checking accounts are mainly insured. Banking regulations help provide financial protection to you when a bank fails. That can still happen – a bank may extend too much credit to borrowers or make bad loans and find themselves unable to maintain their accounts. That could mean the bank might fail, putting financial strain on consumer accounts.

Deposit insurance eliminates that risk. It is a type of insurance that guarantees that the money you put into your bank account will be there when you need it to be. The Federal Deposit Insurance Corporation (FDIC) provides that protection.

Accounts Covered

When you open an account with a bank, credit union, or other financial institution, you should ensure that the account qualifies for deposit insurance. Most common types of deposit accounts qualify. However, it does not provide coverage for investment accounts. Types of accounts covered by deposit insurance include:

• Checking accounts
• Savings accounts
• Negotiable order of withdrawal (NOW) accounts
• Cashier's checks and money orders
• Time deposits such as Certificates of Deposit (CDs)

Most types of investment accounts do not qualify. They include:

• Mutual fund accounts
• Stock investment accounts
• Bond investment accounts
• Life insurance policies
• Annuities
• Safe deposit boxes or anything within them

Coverage Amounts Limits and Rules

Some rules apply to accounts covered by deposit insurance. The most significant is that the standard coverage for these accounts is $250,000 per account owner, per each type of account. Here's a closer look at the coverage limits for each ownership category:

• Single accounts: $250,000 per owner
• Joint accounts: $250,000 per co-owner
• Revocable trusts: $250,000 per unique beneficiary (the person receiving the funds)
• Qualified retirement accounts: $250,000 per owner
• Corporations (including partnerships and unincorporated organizations): $250,000 per party
• Irrevocable trusts: $250,000 per unique beneficiary for the account
• Employee benefits plans: $250,000 per plan participant with rights to the account
• Government accounts: $250,000 per account custodian

What does this mean, though?

Suppose you have money in a deposit-insured account, and the financial institution were to fail. In that case, coverage on your account is up to the insurance level provided (typically $250,000). Suppose you have more than one account with the bank, and they are in different ownership categories (as listed above). In that case, each receives $250,000 worth of coverage.

If you are unsure if you have this type of coverage, you can easily find out by contacting your bank or credit union to ask. You can also visit the FDIC's or NCUA's website to learn more about your deposit coverage. That is an excellent way to verify this information without relying on what the bank tells you.

You can check the amount of FDIC protection on your account using the FDIC Electronic Deposit Insurance Estimator on the organization's website.

The Federal Deposit Insurance Corporation

What is the FDIC? The Federal Deposit Insurance Corporation is an organization that provides deposit insurance to American banks. It gives U.S. deposit holders confidence in using their bank accounts since it helps ensure that consumers can count on protection for their money.

The FDIC was created through the 1933 Banking Act, enacted during the Great Depression. It was a critical tool that helped restore trust in the banking system in the country.

Before establishing the FDIC, more than a third of banks failed, causing consumer panic. It was not uncommon for a bank run to occur. A bank run happens when consumers lose trust in the bank and rush to the bank to withdraw their funds from it, and that paranoia leads to others doing the same thing. At some point, the bank runs out of money to withdraw.

When first put into place, the insurance amount was just $2,500. It was increased in 2010 to $250,000 after several other step-ups over the previous period.

The National Credit Union Association

The FDIC typically covers banks with deposit insurance. The National Credit Union Administration (NCUA) provides the same protections for credit union accounts. The NCUA is a government-based insurer of credit unions throughout the country. It includes regulating, chartering, and supervising all U.S. federal credit unions.

Any federally insured credit union can receive the same type of deposit protection. The standard share insurance amount is $250,000, and that is issued per owner, per insured credit union for each ownership category. If you are unsure if your credit union has this type of protection on your account, you can visit the MyCreditUnion.gov/estimator tool to determine how much protection is in place.

It's important to know that, just like opening an account with a traditional bank, it is up to you to ensure that the financial institution you choose offers NCUA (or FDIC) protections. Ask questions and look for this notice on the information provided by the financial institution to verify it.

Excess Deposits and Insurance

In exploring your deposit insurance rights, you may be wondering what to do when you have more to deposit than the amount of protection provided. If you have an account with more than $250,000, you could lose those excess deposit funds should the bank default. Again, that is not likely to happen, but there are steps you can take to minimize these risks.

The simplest option is to have more than one bank or credit union with whom you deposit funds. That does not always make sense, though. Another option is to use a bank network to help you. IntraFi Network Deposits allow you to put excess deposits in your current accounts into the network. Those excess deposits go into a Certificate of Deposit Account Registry Service, commonly known as CDARS or Insured Cash Sweep or ICS.

You can open more accounts with various ownership categories. For example, you may wish to put some funds into an irrevocable trust that is still accessible to you but gains additional protections.

You can also open accounts at more than one bank, a simple solution that many people take, or use a brokerage account to manage the funds. For example, you could use an investment company to help you invest your funds. Just make sure you know the risks involved.

Protecting Your Money

If you consider opening a new savings or checking account, know what to expect regarding deposit insurance. You can always ask questions about your right to obtain protection for your money. Also, note the importance of finding ways to manage excess funds to minimize any risk to your money.