What are the Best Ways to Insure Excess Bank Deposits

Nov 28, 2023 By Triston Martin

When bank deposits are insured, the financial institution can cover any losses. Banking insurance functions in the same way as other forms of insurance. Your insurance will reimburse you in full if you suffer a covered loss. FDIC insurance only kicks in if a bank fails.

Hence a bank's closure is considered a covered loss. If rephrased another way, you can get up to $250,000 from your bank if it fails. The goal of bank insurance is to reassure customers so they may deposit funds without worrying about losing them. Deposits are essential to a bank's survival.

Customers' deposits are used to finance loans to third parties. These debtors are responsible for repaying their loans with interest. Fortunately, there are options for getting your deposits insured by the federal government if they are more than $250,000. How the federal government might better safeguard overdraft accounts is discussed below.

Ways To Insure Excess Bank Deposits

If your bank is part of the FDIC's insurance program, your accounts will immediately be covered up to the insurance maximum. To be eligible, you need to do nothing out of the ordinary. Here are a few of the most reliable options for protecting savings over what the FDIC will cover.

Create Several Bank Accounts

You may protect your excess deposits by creating accounts at independently chartered banks to increase your FDIC coverage if you are prepared to put in the time and effort to maintain track of your accounts. It is impossible to get more coverage by switching between accounts at the same bank.

To get the greatest CD rates, it's a good idea to spread your money around by opening accounts at many institutions. You may build a CD ladder with many financial institutions. Online banks often provide the highest interest rates on CDs and other deposit accounts. Online banking makes it simple to set up and manage accounts.

Use Credit Unions

Do not forget that non-banking financial assets are also covered. Credit unions compete with the FDIC by providing insurance with similar protections through their regulator, the National Credit Union Administration (NCUA). The Securities Investor Protection Corporation (SIPC) plays that duty for investment accounts, but with different restrictions and procedures.

The Securities Investor Protection Corporation (SIPC) explicitly specifies that losses incurred due to poor investment decisions are not covered. Cash deposits up to $250,000 are protected, with a total of $500,000 for all of a customer's bank accounts. You may get additional protection for the money in your investing accounts at your preferred brokerages.

Learn About FDIC Limitations.

In addition to cashier's checks, money orders, and other goods issued by banks, the FDIC protects traditional deposit products like savings, checking, certificates of deposit, and money market deposit accounts. Each account holder is entitled to $250,000 in insurance coverage per covered financial institution and ownership classification.

FDIC protection does not cover investment items, including stocks, bonds, mutual funds, annuities, and life insurance plans. It also does not protect the things kept in a safe deposit box. FDIC restrictions can be complicated, but it helps to have some background on the various types of account ownership.

By Using CDARS

Certificates of deposit (CDs) are an investment vehicle that may help you save for the future or receive a greater interest rate than a traditional savings account would. You can utilize CDARS to avoid FDIC insurance restrictions if you use CDs in your savings strategy.

CDARS is an abbreviation for the Certificate of Deposit Account Registry Service, a consortium of banks offering multimillion-dollar CD insurance to savers. You invest money with a CDARS network member after signing a CDARS placement agreement and custodial agreement. The funds are subsequently invested in certificates of deposit (CDs) from various banks participating in the CDARS system.

Utilize Banking Networks

There are banking conglomerates that can help you diversify your holdings and hence your FDIC insurance. Your overage funds will be safely invested in checking, money market deposit, or certificate of deposit accounts at one of the FDIC-insured, independently chartered banks in the IntraFi Network.

Like, Impact Deposits Corp. has partnered with almost 200 local banks that are members of the FDIC to provide deposit insurance on excess funds. The deposits free up capital for local lending, and 2 basis points of deposits at participating banks are given to charitable organizations in the communities served.

What are the Limits Of FDIC?

To a certain extent, the FDIC guarantees deposits at its member banks. The industry norm for deposit insurance is $250,000. It applies to any combination of account ownership types and financial institutions.

Customers are not required to get this deposit insurance. If you place your money in a bank that is a part of the FDIC, you are safe. Your total balance in all deposit accounts at any bank cannot exceed $250,000.

Deposits in your name, such as those found in a checking account, savings account, and certificate of deposit, are insured up to $250,000. In other words, the total amount of money in all of your bank accounts combined is subject to the FDIC coverage limit.


Even though bank collapses are uncommon, they do occur. If a bank fails, you must know that your money is secure. There are several options for bridging the gap between your deposits and the FDIC's restrictions.

When FDIC insurance isn't enough to cover your accounts, knowing what other choices you have for deposit insurance will assist. If an individual or business has more than $250,000 in deposits with an FDIC-insured bank, they should verify that the government guarantee covers the whole amount.

Extra FDIC insurance may be necessary for more than just frugal savers and the wealthy. Businesses, foundations, governments, and charities use bank networks and other measures to increase their access to federal deposit insurance.

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