Financial Institutions Insurance

There are various major kinds of financial institutions, and the distinct institution types are insured in different ways. FDIC insurance protects assets in financial institutions that accept deposits, like banks and savings and loan associations. The NCUA insures credit union deposits in the same way. SIPC Insurance provides some protection for broker-dealers if the firm fails financially but does not protect investors if their investment fails.

The Federal Deposit Insurance Corporation (FDIC) is a federal agency that protects customers against the loss of deposits in FDIC-insured banks. FDIC insurance has coverage limits of $250,000 and does not cover money invested in stocks, bonds, mutual funds, life insurance policies, annuities, municipal securities, or money market funds, even if these investments were purchased from an FDIC-insured bank.

The National Credit Union Administration is also a federal agency, but it protects against the loss of credit union deposits. NCUA insurance works in the same way as FDIC coverage.

The Securities Investor Protection Corporation (SIPC), is a nonprofit membership corporation created by federal statute that protects customers of SIPC-member broker-dealers if the firm fails financially. SPIC has coverage limits of $500,000 and does not protect investors if the value of their investments fails.

In addition to FDIC insurance to protect its customers’ deposits, banks also need insurance to protect against the various risks that arise from doing business. For example, Directors & Officers (D&O) liability insurance is a necessary mitigation tool for banks, no matter their size or location. Banks should also have commercial general liability insurance.

Other types of insurance, such as commercial property insurance, professional liability insurance, workers’ compensation, data breach insurance, commercial crime insurance, commercial umbrella insurance, and fidelity bond insurance should also be included in a bank’s coverage portfolio.

Institutions apply for federal deposit insurance by filing an interagency Charter and Federal Deposit Insurance Application form with the appropriate FDIC regional office. Coverage is automatic whenever a deposit account is opened at an FDIC-insured bank.

Approvals are conditioned on the applicant bank’s satisfaction of certain standard conditions, including requirements for minimum initial capital, minimum ongoing capital maintenance for a three-year period, fidelity bond insurance coverage, and financial statement audits. The FDIC may also impose non-standard or prudential conditions on a case-by-case basis.

Yes. Banks are insured by the FDIC, an independent federal agency backed by the full faith and credit of the United States government that insures deposits at member banks if the bank fails. In 1933, after Americans lost their savings when banks failed during the Great Depression, the federal government created the FDIC to keep public confidence.

The majority of banks, including online banks, are FDIC-insured. Even deposits at the Bank of North Dakota, which was established in the early 20th century to promote state agriculture, commerce, and industry and is not FDIC-insured, are guaranteed by the full faith and credit of the State of North Dakota.