Let's Break It Down - Deposit Insurance

Introduction

What happens to your money if your bank fails? In the United States, most people do not have to worry, thanks to deposit insurance. It is one of the most important protections in the financial system.

What Is Deposit Insurance?

Deposit insurance protects people's bank deposits if a bank fails. In the U.S., the Federal Deposit Insurance Corporation, or FDIC, insures deposits up to $250,000 per depositor, per bank, for each account ownership category. Credit unions have similar coverage through the NCUA.

Why It Was Created

The FDIC was created in 1933 during the Great Depression, after thousands of banks failed and people lost their savings. Deposit insurance helped restore trust in banks and reduce bank runs. Since its creation, no depositor has lost insured money due to a bank failure.

What It Covers

FDIC insurance covers checking accounts, savings accounts, money market deposit accounts, and certificates of deposit. It does not cover investments like stocks, bonds, mutual funds, or cryptocurrency, even if purchased through a bank.

Conclusion

Deposit insurance gives people confidence that their money is safe. It is a key reason the banking system remains stable!