Question

1. Calculate the amount of FDIC coverage for each of the following situations where all of your banks are insured with FDIC; A. You are single and do your banking in one place. You have $50,000 in a checking account, $100,000 in a savings account and $200,000 in CDs, for a total of $350,000 in deposits. B. You are single and do your banking in two banks. You have $150,000 in a checking account in one bank, $250,000 in a savings account in your second bank. C. You're married, and do your banking in one place. You have $500,000 in a joint savings account shared with your spouse and $250,000 in a CD in your name.

Answer 1

A. As per FDIC norms, a single account is a deposit owned by one person. This ownership category includes:

• An account held in one person's name only, provided the owner has not designated any beneficiary (ies) who are entitled to receive the funds when the account owner dies
• An account established for one person by an agent, nominee, guardian, custodian, or conservator, including Uniform Transfers to Minors Act accounts, escrow accounts and brokered deposit accounts
• An account held in the name of a business that is a sole proprietorship (for example, a "Doing Business As" or DBA account)
• An account established for or representing a deceased person's funds—commonly known as a decedent's estate account
• A grantor's retained interest in an irrevocable trust
• An account that fails to qualify for separate coverage under another ownership category

The FDIC adds together all single accounts owned by the same person at the same bank and insures the total up to $250,000. In the given case, i an single and have one bank, hence the FDIC combines the three accounts, which equal $350,000, and insures the total balance up to $250,000, leaving $100,000 uninsured.

B. As per FIDC norms, the standard deposit insurance amount is $250,000 per depositor, per insured bank, for each account ownership category.

The FDIC insures deposits that a person holds in one insured bank separately from any deposits that the person owns in another separately chartered insured bank. For example, if a person has a certificate of deposit at Bank A and has a certificate of deposit at Bank B, the amounts would each be insured separately up to $250,000.

In the given case, i am single and both my banks have valid deposit covers (savings and checking account) and both my banks are insured with FDIC. Hence the FDIC will insure amounts in both banks separately upto $250,000. Total amount insured will be $250,000 leaving $150,000 uninsured.

C.  A joint account is a deposit owned by two or more people. FDIC insurance covers joint accounts owned in any manner conforming to applicable state law, such as joint tenants with right of survivorship, tenants by the entirety and tenants in common.

To qualify for insurance coverage under this ownership category, all of the following requirements must be met:

1. All co-owners must be living people. Legal entities such as corporations, trusts, estates or partnerships are not eligible for joint account coverage.
2. All co-owners must have equal rights to withdraw deposits from the account. For example, if one co-owner can withdraw deposits on his or her signature alone but the other co-owner can withdraw deposits only with the signature of both co-owners, the co-owners would not have equal withdrawal rights.
3. All co-owners have personally signed, which may include signing electronically, a deposit account signature card, or alternatively, the insured bank has information in its deposit account records establishing co-ownership of the account. This requirement does not apply to CDs or accounts established by an agent, nominee, guardian, custodian, executor or conservator.

If all of these requirements are met, each co-owner's shares of every joint account that he or she owns at the same insured bank are added together and the total is insured up to $250,000. The balance of a joint account can exceed $250,000 and still be fully insured. For example, if the same two co-owners jointly own both a $350,000 CD and a $150,000 savings account at the same insured bank, the two accounts would be added together and insured up to $500,000, providing up to $250,000 in insurance coverage for each co-owner.

In the given case i and my spouse have $500,000 in join savings account hence we are both qualified for $250,000 coverage each. Additionally, the FDIC provides separate insurance coverage for funds depositors may have in different categories of legal ownership ie single, joint. Since i have $250,000 in a CD as a single, that coverage will also be added to FDIC coverage.

Hence the total coverage in this scenario would be $750,000.