How does fdic work

When you open a deposit account, such as a savings or checking account , you may see a notice stating the account is FDIC-insured. Though it's not very common, a bank can fail when it takes on too much risk, such as extending credit to borrowers that wind up defaulting. When this happens, the bank goes belly up, putting its customers' assets in jeopardy. But thanks to FDIC insurance, you can receive reimbursement up to the maximum amount so your funds aren't lost for good.

But before we dive into insurance limits, here are the basics about FDIC insurance you need to know. The FDIC covers many common deposit accounts, but it doesn't insure investment accounts.

Here are the following types of covered accounts:. You can also see that trusts, benefit plans and other accounts factor in whether there are beneficiaries, participants or custodians connected to it. Here's a breakdown of the FDIC coverage broken up by type of account owner. Most checking accounts and savings accounts provided by major banks offer the standard FDIC insurance. As for savings, going with an FDIC-insured high-yield savings account can earn you more than 10 times the national interest rate.

Skip Navigation. Follow Select. The bank pays the premiums. FDIC insurance covers deposit accounts — checking , savings and money market accounts and certificates of deposit — and kicks in only in the event a bank fails. Losses incurred from investments are not covered, even if they were purchased from an insured bank. FDIC insurance also does not cover contents of a safe deposit box housed at a bank.

One way to make sure all of your money is insured is to spread it across multiple institutions. All of your money is protected in this scenario. Other kinds of ownership categories include certain retirement accounts, such as IRAs, trust accounts and employee benefit plan accounts. All of this money is protected. The CD is a second ownership category single where you are covered up to that amount.

Review NerdWallet's list of best savings accounts. There are too many combinations to cover them all here. Just know that you have options to make sure all of your money is insured.

When a federally insured bank fails, the FDIC will try to sell deposits and loans from the failed institution to a solvent one. Customers will receive notice by mail if the FDIC requires further actions to redeem deposits.

What it means to have FDIC insurance. FDIC insurance limits. How to maximize your FDIC coverage. How to get your money back with FDIC insurance.