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Bank and Credit Union Deposit Insurance Reform


The latest legislation in Congress will do some reforming of FDIC insurance. Insurance limits on retirement accounts are set to increase from $100K to $250K per person. However, the limits won't change on general accounts until 2010 and will only change based on inflation. Changes will be made every 5 years based on inflation.

Current coverage will remain in effect until later this year. According to this Bankrate article, the $100K FDIC limits have remained unchanged since 1980. Before 1980 the limits were $40K.

The FDIC equivalent for credit unions is the National Credit Union Share Insurance Fund (NCUSIF). The insurance limits of the NCUSIF have remained the same as the FDIC limits. It looks like that will continue (NCUA article - pdf).

Even without higher limits on the general accounts, there are several ways for depositors to extend the limits beyond $100K using joint accounts and paid-on-death accounts. FDIC has information on this here. This NCUA publication (pdf) has many details and examples. Here's one of these examples:

Question: Member H invests $100,000 in each of four payable-on-death accounts. Under the terms of each account contract, H has the right to withdraw any or all of the funds in the account at any time. Any funds remaining in the account at the time of H's death are to be paid to a named beneficiary. The respective beneficiaries of the four accounts are H's wife, his mother, his brother, and his nephew. H also holds an individual account containing $100,000. What is the insurance coverage?

Answer: The accounts payable on death to H's wife, mother and brother are each separately insured to the $100,000 maximum. The account payable to H's nephew is added to H's individual account and insured to $100,000 in the aggregate, leaving $100,000 uninsured.