FDIC Insurance Coverage Overview
FDIC insurance covers all deposit accounts, including checking and savings accounts, money market deposit accounts and certificates of deposit. FDIC insurance does not cover other
financial products and services that banks may offer, such as stocks, bonds, mutual fund shares, life insurance policies, annuities or securities.
The standard insurance amount is $250,000 per depositor, per insured bank, for each account ownership category.
The FDIC provides separate coverage for deposits held in different account ownership
categories. Depositors may qualify for more coverage if they have funds in different ownership categories and all FDIC requirements are met. (For details on the requirements, go to
www.fdic.gov/deposit/deposits).
The Insured Cash Account (ICA) insures a client’s cash for up to $1,500,000 for individuals and trust accounts and $3,000,000 for joint accounts.
Basic FDIC Deposit Insurance Coverage Limits
It is a good idea for clients to periodically review their bank deposits to determine whether their cash is within the coverage limits. The rules related to FDIC insurance coverage are complex and it is important that clients review all of their cash deposits held at an individual bank. There are several categories of assets that clients should aggregate when analyzing the amount of coverage they have.
• Cash in the Insured Cash Account (ICA)
• Brokered CDs purchased through LPL Financial • Brokered CDs purchased through other entities
• Other bank deposits held directly by the client, such as checking and savings accounts and CDs
FDIC Insurance in the ICA Program
The ICA leverages multiple banks in order to provide FDIC insurance coverage of up to $1,500,000 per individual or trust account and up to $3,000,000 for joint accounts. Within an eligible LPL Financial account, cash at an individual bank will be deposited in increments of $246,500 for individual or trust accounts and $493,000 for joint accounts. Clients should analyze their accounts to ensure the total amount at any one bank does not exceed $250,000 for an individual or trust account or $500,000 for a joint account.
Single Accounts (owned by one person) $250,000 per owner Joint Accounts (two or more persons) $250,000 per co-owner IRAs and certain other retirement accounts $250,000 per owner
The client’s ICA cash could be deposited into multiple banks within a single account. All the banks in which the client’s cash may be deposited are listed on the LPL Financial website at http://lplfinancial.lpl.com/x68.xml. Clients should review this list carefully to ensure their cash is allocated in a way that best meets their needs.
The amount of cash on deposit at each bank will be listed on the client’s monthly statement. This information is also available on BranchNet in Account Browse. In addition, the client’s
statement will list any brokered CDs purchased through LPL Financial that the client holds. This allows clients to determine, in aggregate, how much cash is held at a bank within their LPL Financial accounts. Clients should also identify any other cash they may have on deposit at that bank outside of their accounts at LPL Financial.
If an ICA client has more than $250,000 in a single bank, ($500,000 for joint accounts) either in their combined LPL Financial accounts, in a brokered CD through LPL Financial, or in accounts or CDs outside of LPL Financial, the Financial Advisor may remove that bank from one or more ICA accounts by using the Insured Cash Accounts Bank Opt Out Form in the Service Express menu.
LPL Financial may opt-out of a bank in the ICA program on the client’s behalf if a situation is identified in which the client’s cash exceeds $250,000 at a single bank. However, the client is responsible for monitoring the total amount of cash on deposit with each bank in order to determine the amount of deposit insurance coverage they have.
General FDIC Coverage Limits
Following is a general overview of FDIC Insurance coverage limits to help you and your clients determine the amount of coverage they have. However, please note:
The rules related to FDIC insurance coverage are complex and this information is intended only to provide general guidance. Clients should refer to the FDIC website if they have detailed questions about the extent to which their deposits are covered. The following URL is a link to a page called “Are My Deposits Insured” and has numerous resources for clients, including an FDIC coverage calculator.
http://www.fdic.gov/deposit/deposits/index.html
The FDIC generally insures individual depositors, per ownership category, up to $250,000 per bank.
For FDIC coverage limit purposes, a depositor is defined by ownership category. This means the insurance limits are applied per category so that if a client has accounts in multiple categories, they are insured separately. The FDIC has eight ownership categories and each has specific requirements that must be met to receive separate insurance
Common FDIC Ownership Categories and Coverage Limits Single Accounts The individual depositor is insured up to $250,000.
All funds in an individual’s single accounts are combined to determine the amount of coverage.
Certain Retirement Accounts
These are deposits owned by one person and titled in the name of that person’s retirement account.
All types of IRAs qualify, plus Section 457 deferred compensation plans, self-directed defined contribution plan accounts and self-self-directed Keogh plan accounts.
All eligible retirement accounts listed above owned by the same person are added together and the total is insured up to $250,000.
Joint Accounts Joint accounts are deposits held in the names of two or more persons. Each co-owner is assumed to own an equal share of the account. Each co-owner is insured up to $250,000.
All funds in an individual’s joint accounts are combined to determine the amount of coverage.
Revocable Trust Accounts
Each beneficiary is covered up to $250,000.
The account title must include commonly accepted terms such as "payable on death," "in trust for," "as trustee for" or similar language.
Coverage Examples
Single Account Example 1 – ABC Bank
Account Title Account Type
Account Balance Mary Smith LPL Brokerage Account – ICA $125,000
Mary Smith LPL SAM Account – ICA $10,000
Mary Smith LPL Brokered CD $50,000
Mary Smith Checking Account $5,000
Total Deposits $190,000
Amount Insured $190,000
Amount Uninsured $0
Single Account Example 2 – ABC Bank
Account Title Account Type Account Balance
Mary Smith LPL Brokerage Account – ICA $175,000
Mary Smith LPL SAM Account – ICA $125,000
Mary Smith LPL Brokered CD $125,000
Mary Smith Checking Account $10,000
Total Deposits $435,000
Amount Insured $250,000
Joint Account Example 1 – ABC Bank
Account Title Account Type Account Balance
Mary and John Smith LPL Brokerage Account – ICA $125,000 John or Mary Smith Brokered CD with another firm $150,000 Mary or John or Robert Smith CD Direct with ABC Bank $210,000
Total Deposits $485,000
Insurance coverage for each owner is calculated as follows:
Depositors Ownership Share Amount Insured Amount Uninsured
Mary $207,500 $207,500 $0
John $207,500 $207,500 $0
Robert $70,000 $70,000 $0
Total $485,000 $485,000 $0
Joint Account Example 2 – ABC Bank
Account Title Account Type Account Balance
Mary and John Smith LPL Brokerage Account – ICA $125,000 John or Mary Smith Brokered CD with another firm $250,000 Mary or John or Robert Smith CD Direct with ABC Bank $240,000
Total Deposits $615,000
Insurance coverage for each owner is calculated as follows:
Depositors Ownership Share Amount Insured Amount Uninsured
Mary $267,500 $250,000 $17,500
John $267,500 $250,000 $17,500
Robert $80,000 $80,000 $0
Tips to Maximize FDIC Insurance Coverage
The FDIC insures individual depositors up to $250,000 per bank per ownership category. By utilizing separate ownership categories, clients can maximize the amount of insurance coverage they have at any one bank. Following are some examples of depositors with more than $250,000 worth of coverage in a single bank.
Example 1: Mary Smith
Account Ownership @ ABC Bank Balance Mary’s Insured Balance
Mary Smith (Individual Account) $250,000 $250,000 Mary Smith and Robert Smith
(Joint Account - Each owns half)
$200,000 $100,000 Mary Smith and Jane Smith
(Joint Account - Each owns half)
$200,000 $100,000 Mary Smith and Jim Smith
(Joint Account -Each owns half)
$100,000 $50,000 Mary Smith IRA $250,000 $250,000 Mary Smith In Trust For Jane Smith and
Jim Smith (Revocable Trust)
$500,000 $500,000
Total for Mary Smith $1,500,000 $1,250,000
Example 2: John and Jane Parker
Account Ownership @ ABC Bank Balance John’s Insured
Balance
Jane’s Insured Balance
John Parker (Individual Account) $250,000 $250,000 $0 Jane Parker (Individual Account) $250,000 $0 $250,000 John and Jane Parker
(Joint Account - Each owns half)
$500,000 $250,000 $250,000 Jane Parker IRA $250,000 $0 $250,000 John Parker IRA $250,000 $250,000 $0 John and Jane Parker In Trust For
Nell Parker and Bill Parker (Revocable Trust)
$1,000,000 $500,000 $500,000
