About Banks That are not FDIC Insured

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The Federal Deposit Insurance Corporation insures deposits at national and local banks across the United States, so depositors who keep their balances below a certain limit won't lose money even if banks fail. Some financial products, like investment accounts, aren't insured, and some banks also aren't insured by the FDIC. Credit unions are federally insured by a different federal agency.

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Understanding FDIC Insurance

The Federal Deposit Insurance Corporation was created as part of President Franklin Delano Roosevelt's New Deal program after bank account holders lost large amounts of money as banks closed during the so-called bank runs of the Great Depression. The FDIC now insures account holders against losing money as long as they keep their balances below a certain level, even if a bank fails. Banks pay insurance premiums to the FDIC, so customers don't have to do anything to enable insurance on their accounts.

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The FDIC typically insures up to $250,000 per depositor per bank, although there are certain circumstances where depositors can have more insurance for accounts in different ownership categories, such as trust accounts. There's no cost to account holders to carry FDIC insurance, and you don't have to do anything besides open an account at a participating bank to have your money protected. Funds beyond the $250,000 limit are not insured by the FDIC, so if you have more money than that in a single bank and you are concerned about losses in the event of a bank failure, you may want to open an account at another bank and move some of your funds.

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The FDIC boasts that since its creation, nobody has lost any money insured by the FDIC. It is backed by the United States government. Some states, including Massachusetts and Indiana, provide their own deposit insurance for some banks in those states to cover balances that exceed the FDIC limit. Check with your state government to see if it offers such a program, how it works and which banks are covered.

Non-FDIC Banks and Institutions

United States banks will normally advertise that they are members of the FDIC system. You can verify that a bank participates by searching for it using the FDIC website's BankFind database. Some banks in the United States are not FDIC insured, but it is very rare. One example is the Bank of North Dakota, which is state-run and insured by the state of North Dakota rather than by any federal agency.

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If you open an account at a bank outside the United States, it will not carry FDIC insurance, although it may carry its home country's deposit insurance. Check with a foreign bank and its regulators to see what kind of deposit insurance, if any, is offered.

Federal credit unions don't carry insurance from the FDIC, but they do carry equivalent insurance from another agency called the National Credit Union Administration. Check with the NCUA to verify a credit union is insured and learn details about how the insurance program works.

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Accounts That Aren't Insured

Some banks may offer financial products that aren't FDIC insured. Examples include stock market trading accounts, stocks and bonds and insurance policies. Stock accounts may carry separate insurance to make sure you don't lose your holdings if the financial institution fails, but they won't insure you against your stocks declining in value.

Some stock brokerages may provide features where cash in your trading account is moved, or "swept," into FDIC-insured accounts overnight to protect you against loss. Contact your brokerage to find out the details of such a program.

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Money market funds, which are investment products you can put money into through a brokerage, are generally not FDIC-insured. The similarly named money market accounts at FDIC-insured institutions typically are insured. If you have questions about what is and is not insured, contact your financial institution.

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