Avoid financial disaster by understanding deposit insurance

April 04, 1993|By Knight-Ridder News Service

What could be safer than money in the bank? In most cases, nothing.

But each year, consumers lose millions of dollars in uninsured deposits -- that is, amounts above $100,000 -- after their banks fail. And those losses have been growing in recent years, according to the Federal Deposit Insurance Corp., the government agency that insures bank deposits.

When banks fail, uninsured deposits may be seized by the FDIC. The agency uses that money to help cover the costs of those failures.

So how can you avoid losing money? By understanding how deposit insurance works.

Many depositors think they can have only $100,000 insured in anyone bank. Not so. It depends on how the accounts are titled.

The most common titles include: joint accounts, individual accounts, testamentary accounts and individual retirement accounts.

The $100,000 limit for deposit insurance applies separately to each of these categories. A person could be insured for up to $100,000 in each possible category.

Someone who had $100,000 in an individual account could also have $100,000 in a joint account. An additional $100,000 could be in an individual retirement account -- all at the same bank.

For more information, write for a free booklet called "Your Deposit Insurance." Address your request to FDIC, Washington,

D.C., 20429.

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