Many people hear the term FDIC during an economics class or perhaps when reading brochures at their local bank, but do they really know what the organization does? In fact, is the average person even aware of what the acronym stands for? Well, in response to both questions, the FDIC, (which stands for the Federal Deposit Insurance Corporation), is a governmental entity that insures banks and other types of financial institutions. The amounts that are covered are $100,000 for individual customer accounts or businesses and up to $250,000 for retirement accounts.

In either case the money is reserved in the event the bank fails. However, not all types of banking accounts or situations are covered. This article will discuss these elements along with those that are covered by the organization.

Things Not Covered by the FDIC

1. Investment Accounts

The FDIC does not provide protection for losses associated with mutual funds, stocks or bonds. The organization also does not cover investments originating from the U.S. government. Examples could be savings bonds or Treasury securities. If a person wants protection from any of these types of investment accounts, they will need to transfer the funds into accounts that are protected.

2. Safe Deposit Box Contents

Ironically enough, safe deposit boxes are not legally considered real deposits. This is despite having deposit as part of its namesake. In the eyes of the government it is simply a secure place where funds or other things can be held. However, if something does happen that could jeopardize what is held in a safe deposit box, bankers are not necessarily left out in the dusk. This is because many homeowner’s insurance policies or renter’s policies cover safe deposit boxes if the contents within are stolen or destroyed.

3. Financial Loss Due to Theft or Fraud

If a person robs a bank, the FDIC would not protect the funds stolen. In these situations, banks are covered through their own insurance, allowing the financial interests of both themselves and their customers to be protected.

4. Account Errors

FDIC does not cover errors made in one’s account, however, banks and other financial entities are usually more than willing to work with their customers if there is a dispute or a discrepancy. The best way to address possible account errors is to keep good records and immediately report the discrepancies to the financial institution.

5. Insurance

Insurance products cannot be covered unless they are liquidated and put into an account that is coverable. This includes annuities as well as standard home, life and health insurance policies.

Accounts and Funds that are Covered by the FDIC

1. Savings Accounts

Savings accounts held on the bank are all insured. These accounts allow one to have free access to their funds, including deposit and withdrawal, and are covered by the FDIC.

2. Checking Accounts

Checking accounts hold monies to allow for electronic withdrawal and/or withdrawal through a check. Most checking accounts simply act as a virtual piggybank, but there are some that allow a person to collect interest. Examples are NOW (Negotiable Order of Withdraw) accounts or Money Market Deposit Accounts. All these depository accounts are FDIC insured.

3. Certificate of Deposit

Many Certificate of Deposits, (also known as CDs), are covered by the FDIC. These are financial instruments that accrue interest over a certain period of time. Of course, the keyword is ‘many’, since there are some types of CDs that are not eligible for FDIC coverage. The non-eligible CD’s still have insurance based on the principal amount of the CD but in some cases the interest or income derived on the CD will not be insured. To find out if an individual CD is covered, it is best that a person makes an inquiry of the financial institution they are working with.

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