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What Is FDIC Insurance?

What Is FDIC Insurance?

You’ve likely seen the FDIC logo and heard of it but what is it actually and how does it work?

FDIC stands for Federal Deposit Insurance Corporation. The FDIC is an independent agency of the U.S. government that protects depositors (that’s you) against loss if an FDIC-insured bank should fail or close. While it is not common, it can happen. Understanding how FDIC insurance works is important.

It’s an added security for your money should something happen to the institute you deposit at.

What’s even better is that you don’t have to do anything except for ensure your financial institute is FDIC-insured, like Home State Bank is.

FDIC deposits are insured up to at least $250,000 per depositor, per category. The insurance is calculated dollar-for-dollar and includes any interest and principal amounts owed to the depositor.

Here’s an example to help you understand:

A customer has a CD account in their name with a principal balance of $150,000 and $2,000 in interest accrued. The total amount, $152,000 would be insured.

What Else You Need to Know About FDIC insurance

While FDIC insurance does support financial security in the case of a failed financial institute, there are some items you need to be aware about, listed below.

  1. Not all products are insured. Anything that isn’t a deposit, such as stocks and bonds, mutual funds, and life insurance policies are not covered. What they typically cover include checking and saving accounts, CDs (certificate of deposit), and MMDA (money market deposit accounts).
  2. There is a limit, which is $250,000 per depositor, per ownership category. You can have multiple categories at the same FDIC-insured bank, each with up to $250,000 coverage. There are some exceptions for revocable and irrevocable trust accounts.

As an FDIC-insured bank, Home State Bank always takes every precaution to protect your financial assets. If you have any questions on the coverage on any of your accounts, contact our team today.

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