Updated: May 3, 2013 12:14PM
"If your bank account is less than $100,000, you don't have to worry about the safety of your account." That was the message FDIC Chairman Sheila C. Bair brought to Chicago community leaders Wednesday.
Her visit was part of a long-planned celebration of the FDIC's 75th anniversary. The system of deposit insurance was started in 1933 after the bank failures of the Great Depression. Over the years, the amount of insurance has been increased from the original $2,500 to the current $100,000 limit, which was established in 1980.
Bair explained that even during the FDIC takeover of IndyMac last weekend, all insured depositors had access to their money through debit cards and online account access. Of the $1 billion above the insured level, half of that money has already been returned to depositors in IndyMac, and more may be distributed as the bank's assets are liquidated.
Putting the banking situation in perspective, Bair noted that there were only three failures last year, and four failures in 2008 before the IndyMac takeover. While there are currently about 90 banks on the FDIC's "watch list," that is small compared with the 534 financial institutions that were taken over by the government in 1989 during the S&L crisis. That situation ultimately claimed 2,800 institutions. And not one penny of insured deposits was lost.
Still, news video of people lining up outside the bank is making depositors in other institutions queasy about the safety of their money. So here's a reminder about how the deposit insurance works, and how you can structure your accounts to have greater coverage for various accounts in the same bank.
**Individual accounts: covered up to $100,000 per person, including all types of accounts, such as checking, CDs and money market accounts.
**Retirement accounts: covered up to $250,000 per person -- in addition to any other insured accounts.
**Joint accounts: Each person's interest is covered up to $100,000. This is in addition to coverage for a single account the person might also have in the same bank. But simply reversing the "order" of the names on a joint account does not increase coverage.
**Sole proprietorships: These "business" accounts are considered individual accounts and added to the individual's accounts to determine coverage.
**Business accounts: Accounts for one business are added together and insured up to $100,000 -- even if there are several "signers."
***Revocable living trust accounts. These include payable on death accounts and formal living trust accounts. Each beneficiary of each account holder is insured up to $100,000 -- but only if the beneficiaries share equally, and if the beneficiary is correctly named, and only certain beneficiaries qualify!
To understand the specific requirements for each account, go to www.FDIC.gov. There is a direct link at www.TerrySavage.com. Or check with your bank to make sure you are within the insured limits on all your accounts. Then you can sleep well, and avoid panic.