What Is FDIC Insurance And Why It Is Important

FDIC insurance stands for Federal Deposit Insurance Corporation, and is an isurance that is funded by premiums paid by the financial institutions. All of your accounts should be in banking institutions with FDIC insurance.

For example, if your bank becomes insolvent, your deposit balances are insured and repaid to you from the FDIC.

If you do have to rely on the FDIC your biggest concerns will be the timing required to receive your money and the lack of interest on your funds until the date the insurance pays you.

So it is a smart idea to have emergency reserves in a separate financial institution if insolvency is a concern. Furthermore, your deposits are guaranteed up to $100,000 per financial institution, not per account.

If you have deposits that exceed the $100,000 limit in one bank, you should consider moving the excess to another financial institution if you want the deposits insured by the FDIC. This would include any accounts that you may have acquired through a checking account promotion.