FDIC FAQs

A bank becomes FDIC-insured (or Member FDIC) by applying for FDIC insurance coverage and paying premiums, much like an individual would pay for health or auto insurance. These premiums are then pooled and used to protect the depositors of insured banks should a bank failure occur.

It’s easy to determine if your bank is FDIC-insured. Simply look for a “Member FDIC” sign at any bank location, on your bank’s website, or by asking any representative of your bank. Another way you can determine if your bank is FDIC-insured is by using the FDIC’s BankFind tool.

As a bank customer, it is not necessary to apply for FDIC insurance coverage. Coverage is automatic whenever you open an account with an FDIC-insured bank. If FDIC insurance coverage is important to you, simply make sure that a bank is FDIC-insured prior to opening an account.

Customers of FDIC-insured banks are automatically insured up to $250,000 per depositor, per FDIC-insured bank, per ownership category. The $250,000 coverage limit includes principal balance plus any interest that was accrued through the date that the bank went out of business.

Yes, FNBO is an FDIC-insured bank which means each depositor of FNBO is insured up to $250,000 per ownership category.

In general, deposit accounts are insured by the FDIC as well as some payment instruments, including:

• Checking accounts
• Savings accounts
• Certificates of Deposit (CDs)
• Money Market Deposit Accounts (MMDAs)
• Cashier’s checks, money orders, and negotiable order of withdraw accounts
• Some prepaid cards

Accounts that are not protected by the FDIC include investment products such as:

• Mutual funds
• Annuities
• Life insurance policies
• Municipal securities
• Stocks and bonds
• The contents of safe deposit boxes

Customers of FDIC-insured banks are insured up to $250,000 per depositor, per FDIC-insured bank, per ownership category. This means that depending on the different types of accounts you hold, and how many different FDIC-insured banks you bank with, you could be eligible for more than $250,000 in coverage. Here’s a breakdown of the different ownership categories and how FDIC insurance coverage is calculated for each one.

• Single Accounts
  A single account is owned by one person without named beneficiaries. The balances of all single accounts owned by the same person at the same bank are added together and insured up to $250,000.

Example: Let’s assume that at Bank A you are the single owner of a checking account with a $5,000 balance, a savings account with a $45,000 balance, and a money market account with a $200,000 balance.

Then, at Bank B you have another money market account with a $260,000 balance. In this scenario, you would be insured for $250,000 at Bank A and at Bank B you would be insured for another $250,000 but uninsured for the remaining $10,000 in balances that are over the coverage limit.

Note: By designating beneficiaries to single and joint accounts (frequently referred to as a Payable on Death “POD” designation), you can increase the insured balance of an account. If your account balances exceed the single account limit, please refer to the FDIC guidelines for more information.

• Joint Accounts
  A joint account is a deposit account owned by two or more people at the same bank with no beneficiaries. Each co-owner’s share of all joint accounts at the same bank are added together and insured up to $250,000.

Example: At Bank A, if you are an equal joint owner with no beneficiaries of Account 1 with a balance of $250,000 and an equal joint owner of Account 2 with a balance of $300,000, your total share between the two accounts adds up to $275,000 (300,000 + $250,000/2). This means that $250,000 of your share of joint accounts at Bank A would be FDIC insured and $25,000 would be uninsured.

If you are also a joint owner with no beneficiaries on accounts at other FDIC-insured banks, your share of all joint accounts at each bank would be insured up to $250,000 per bank.

Note: By designating beneficiaries to single and joint accounts (frequently referred to as a Payable on Death “POD” designation), you can increase the insured balance of an account. If your account balances exceed the joint account limit, please refer to the FDIC guidelines for more information.

• Self-Directed Retirement Accounts
  A self-directed retirement account is an individual retirement account or a self-directed defined contribution plan such as a 401k, an IRA, or profit-sharing plan. The balances of all self-directed retirement accounts for the same person at the same bank are added to together and insured up to $250,000.

Example: If you had $100,000 in an IRA account and $85,000 in a self-directed profit-sharing plan at the same bank, your total balances of $185,000 would be fully insured.

As with single accounts and joint accounts, any combined balances in self-directed retirement accounts that you hold with other FDIC-insured banks would be insured up to $250,000 per bank.

• Trust Accounts & Employee Benefit Accounts
  Less commonly used personal accounts include trust accounts and employee benefit plans. The Insurance rules and limits for these types of accounts are more complex and take several factors into consideration. For more information on insurance rules for trusts and employee benefit plans, visit the FDIC’s Electronic Deposit Insurance Estimator.

Some financial institutions like FNBO offer additional services such as Insured Cash Sweeps (ICS) to help protect customers with account balances exceeding $250,000. 

ICS protects the funds by automatically breaking up deposit balances that surpass the standard FDIC coverage limits. Excess money is “swept” into FDIC-insured accounts at multiple financial institutions.

Institutions like FNBO that offer Insured Cash Sweeps (ICS) are members of the IntraFi network. When institutions place a deposit through ICS, that deposit is divided into amounts under the standard FDIC insurance maximum of $250,000. The amounts are then placed into deposit accounts at multiple FDIC-insured banks. As a result, customers can access FDIC coverage from many institutions while working directly just with their primary bank. Learn more about FNBO's ICS services.

When you deposit money at a bank, that bank can use those funds to loan money to borrowers who then pay interest on their loans. This is ultimately how banks make money because the difference between the interest earned from loan borrowers and interest paid to depositors (plus other operating expenses) is considered the bank’s profit. When a circumstance arises in which a bank can no longer meet it’s obligations to depositors, the FDIC will close that bank and FDIC insurance kicks in.

In the unlikely event that your FDIC-insured bank would be closed by the FDIC, you will likely have access to your funds within a couple of business days. Generally, the FDIC will respond in one of two ways:

1. The FDIC pays insurance to depositors up to the insurance limit by providing each depositor with a new account at another insured bank in an amount equal to the insured balance of their account at the failed bank, or
2. By issuing a check to each depositor for the insured balance of their account at the failed bank.

In some cases such as when deposits exceed $250,000 and are linked to more complicated ownership situations, the FDIC may need additional time to determine the amount of deposit insurance coverage and may request supplemental information from the depositor to complete the insurance payout.

For additional information and the latest updates regarding the FDIC and FDIC insurance, visit https://www.fdic.gov/resources/deposit-insurance and/or https://www.fdic.gov/resources/deposit-insurance/understanding-deposit-insurance.