Don’t Leave Your Money Uninsured: What To Do If You Have More Than $250,000 at One Bank

Happy African American insurance agent going through reports while having consultations with a couple during the meeting.
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If you have over $250,000 saved at one bank, it’s time to reevaluate the safety of these excess funds.

There are a few reasons why banking customers need to conduct this evaluation. The first is keeping your savings in compliance with FDIC insurance standards. FDIC insurance protects up to $250,000 per depositor at insured banks for each account ownership category. 

The second reason is that, while rare, banks can fail. Ben McLaughlin, savings expert and Raisin U.S. president, said if the bank holding your money fails, you will likely only be insured for the first $250,000 you have at that institution. If you exceed the federal insurance limit, you could potentially lose any funds over this amount if the bank fails.

If you have over $250,000 at one bank, make these moves to insure excess deposits.

Move Excess Cash to Different Insured Banks

If you have a bank account with a balance that exceeds the federal limit, McLaughlin recommends moving this excess cash to a savings account at a different federally insured bank.

Doing so will maximize your deposit insurance and help keep all of your cash safe. In the event you have $1 million, McLaughlin said you can spread this money out across several distinct insured banks by keeping $250,000 at one insured bank, $250,000 at another insured bank and so forth.

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Open Accounts in Different Ownership Categories

What if you want to stay with your current bank? George Pennacchi, a finance professor at the University of Illinois Urbana-Champaign, told Marketplace there are different types of ownership accounts that are each eligible for the $250,000 limit. 

A few examples of different categories include single, joint and retirement accounts. While you may need to meet specific requirements, opening these accounts may be a good way to receive coverage for excess funds.

Add Beneficiary Designations on Bank Accounts

Adding beneficiary designations on your bank accounts is known as Payable-on-Death (POD) features, said Christopher Stroup, CFP and financial advisor at Abacus Wealth Partners.

“The account owner can name up to three beneficiaries on the account with each having FDIC coverage up to $250,000,” Stroup said. “This means a jointly titled bank account with three beneficiaries named would have FDIC coverage up to $1.25 million.”

Create Breathing Room in Accounts Earning Interest

Those who keep their money in high-yield savings accounts are also recommended by McLaughlin to keep slightly less than $250,000 in these accounts. 

This is because these savings products accrue interest. The ideal amount of money per individual account, McLaughlin said, is slightly less than $250,000 because it saves room for your interest.

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