How experts say you can have bank deposits over $250,000 insured

As for bank deposits, $250,000 is the key figure experts are talking about in light of recent financial shocks in the banking sector of a severity not seen since the financial crisis.

This amount is the threshold that bank depositors should be aware of when it comes to whether their money is insured by the Federal Deposit Insurance Corporation, or FDIC. Coverage limits are per depositor, per owner category, per bank.

Deposits below this amount are covered, while money above this limit cannot be insured if unforeseen circumstances arise in a financial institution.

Still, the government recently made an exception for people with more than $250,000 on deposit at Silicon Valley Bank and Signature Bank.

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On Friday, President Joe Biden said that if further instability occurs, the FDIC may guarantee deposits above $250,000 again.

The $250,000 threshold was set by Congress in 2010. Some experts say it’s not enough and should be raised.

Congress can temporarily suspend the limit. However, Treasury Secretary Janet Yellen has said that uninsured deposits should only be covered if a “failure to protect uninsured depositors would create systemic risk and significant economic and financial consequences.”

In general, most consumers do not need to worry about their deposits.

“If you have less than $250,000 in a bank account, this doesn’t matter to you — you’re fully insured,” said Jill Castilla, president and CEO of Citizens Bank of Edmond, a community bank in Edmond, Oklahoma.

“It’s just when you start to see those limits that you can have some exposure,” Castilla added.

Experts say there are still ways to get FDIC coverage even if you’re over the $250,000 limit.

FDIC insurance typically covers $250,000 per depositor, per FDIC-insured bank, per ownership category. But some financial institutions can circumvent these limits by partnering with other financial institutions to guarantee higher deposit levels.

Citizens Bank of Edmond offers additional coverage, with a limit of $150 million per depositor, through the IntraFi Network.

“If you’re able to use IntraFi, you don’t necessarily have to go to another bank to get another $250,000,” Castilla said.

Because the bank’s average deposit is typically $25,000, Citizens Bank of Edmond doesn’t use the enhanced coverage often, Castilla said.

To register, customers must sign an agreement allowing the bank to use IntraFi to cover their deposits.

Customers can also go through the list of banks in the IntraFi network and exclude those with whom they prefer not to have deposits, Castilla said.

Those who register with IntraFi can choose from different products with either variable or fixed rates provided through money market funds or certificates of deposit, Castilla noted.

From the depositor’s point of view, the process should be simple.

“The banker should be having these conversations with them if they have uninsured deposit exposure,” Castilla said.

It’s worth noting that there are ways to get coverage for balances over $250,000, including the Depositors Insurance Fund, which is privately sponsored by the industry. Some states also provide backstops for FDIC insurance, Castilla noted.

Other types of accounts may offer different protections, such as the National Credit Union Administration for credit union deposits or the Securities Investor Protection Corporation for brokerage accounts.

To be safe, it’s best to read the fine print to fully understand your coverage limits.

Another way to get more than $250,000 in coverage for your deposits is to add beneficiaries.

If you have $1 million in deposits, for example, you would only have $250,000 covered on your own, Castilla said, leaving $750,000 uninsured.

But if you add four beneficiaries — a spouse and three children — that adds up to an additional $750,000 in coverage, or $250,000 per person, as long as the beneficiaries have no other deposits in the bank, Castilla said.

Before using this strategy, carefully consider how this will fit into your estate plan.

Under FDIC rules, deposits owned by one person with no beneficiaries are considered individual accounts. However, when the owner of a single account designates one or more beneficiaries, the account can be insured as a revocable trust account, as long as it meets certain requirements.

Remember that beneficiaries always take priority over a will, noted Carolyn McClanahan, a certified financial planner and founder of Life Planning Partners in Jacksonville, Florida.

“If you have a beneficiary account, that asset will not go through your will,” McClanahan said.

Also, if you name your children as beneficiaries but they are not yet 18, a guardian must take control of the money until they reach adulthood, McClanahan noted. That could make it more expensive for them to claim the money, she said.

Alternatively, you can set up a trust and specify in your will that the money is to be kept there until your children are of age. Then, on your bank receiver forms, you will name the trust instead of your children.