How Safe Are Bank Deposits?

Recent Changes to FDIC Coverage Limits

Kenneth A. Hansen, JD, CPA, LLM, and Steven J. Carlson, PhD, and Robert J. Dosch, PhD

One charge of the Federal Deposit Insurance Corporation (FDIC) is to provide limited protection for funds on deposit at financial institutions. There are myriad rules concerning FDIC deposit insurance, including a recent temporary increase in deposit coverage. With an increased number of bank failures, an understanding of the FDIC insurance coverage rules is an important component of an individual's investment strategy. Accountants should be cognizant of these rules to provide sound financial advice. Bank “depositors” should be especially aware that the new, increased FDIC insurance coverage limits are only temporary, with an expiration date of December 31, 2009. This article provides specific guidance on how FDIC insurance coverage rules directly affect individual account balances. The examples used to illustrate the FDIC insurance coverage rules will be based on the dollar limits in effect until December 31, 2009.