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The recent failures of Silicon Valley Bank and Signature Bank have left many wondering if their own bank accounts are safe. We are going to explore FDIC insurance, how to calculate it for your own bank accounts, and provide alternative options if you have uninsured funds.

What is FDIC insurance?

The FDIC (and the NCUA for credit unions) provide peace of mind that your deposits in your bank or credit union are safe in case your banking institution fails. Member banks and credit unions pay premiums to these entities. In exchange, depositors in a member institution receive protection on their funds.

Without this insurance, banks would be subject to “runs” by their customers. Runs happen when large numbers of depositors rush to withdraw their money because of a loss of confidence in the bank. This is a big deal because banks don’t have reserves on hand to pay all of their depositors at once.

Though FDIC insurance exists, Silicon Valley Bank failed because of an old fashioned run on the bank. Why? Because SVB reported 88% of deposits in its bank were uninsured. In this case, FDIC would still protect insured deposits, but uninsured depositors would need to wait to get their money back after the bank’s assets were sold (and they likely won’t recover 100% of their funds). Because of this, a lack of confidence in SVB spread panic throughout depositors with uninsured funds.

How much of my money is insured?

The FDIC and NCUA insure up to $250,000 per person. HOWEVER, you can structure your accounts to increase your coverage. 

The FDIC provides $250,000 per depositor for each ownership category. This means you might already have more coverage than you think. For example, if you have: 

Individual account: $250,000 of coverage. 

Joint accounts: $250,000 per person ($500,000 total). 

Joint + Individual accounts: If you have a joint account and an individual account, these are two separate account types with their own amount of insurance (up to $750,000 total). 

Trust accounts (or payable on death designations): A revocable trust account with five or fewer beneficiaries is insured up to $250,000 for each unique beneficiary. An “informal revocable trust” (often called a payable on death account by the bank) qualifies for this increased amount. 

 Other ownership categories include certain retirement accounts and business accounts. If you are trying to increase your FDIC coverage, you might be able to accomplish this by utilizing things like joint accounts or by adding multiple payable-on-death “beneficiaries” to your existing accounts!

Try this calculator to see if your money is safe

Conveniently, both the FDIC and NCUA have online calculators to help determine how much of your money is insured:

FDIC insurance calculator 

NCUA insurance calculator 

These calculators will ask you about the account types you have (individual, joint, trust, etc.), the payable-on-death designations (if any), and your balances in each account. They will tell you how much of your funds are insured.

A solution for large bank deposits

What if you have uninsured funds at your bank or credit union? Stewardship has a solution! We have partnered with StoneCastle and their Federally Insured Cash Account (FICA). They provide a high-yield account with FDIC coverage up to $25 million ($50 million for joint accounts). 

How can they do this? StoneCastle splits your funds between multiple partner institutions without exceeding $250,000 in any one entity. 

Instead of opening accounts at multiple banks, let us do the work for you! Other highlights include: 

  • Competitive yield
  • Next day liquidity with no transaction fee or redemption gates 
  • Safety (no counterparty or credit risk)

This is especially beneficial for high net worth investors, businesses and organizations, money from recently sold homes or businesses, and large trusts or inheritances.

To find out more about our insured cash account, schedule a phone call or send me an email!