FDIC Deposit Insurance Certificates of Deposit
The term FDIC stands for the Federal Deposit Insurance Corporation. The FDIC is an agency of the U.S. government and its purpose is to protect investors against the loss of their money in an FDIC-insured bank or savings institution. The FDIC is backed by the U.S. government.
The FDIC was created in 1933, and since that time, no investor has lost any funds that were FDIC insured.
Are Certificates of Deposit FDIC Insured?
FDIC insurance covers all deposit accounts at insured banks. This includes checking and savings accounts, money market deposit accounts, and certificates of deposit up to the insurance limit. On CDs, the cap limit is currently $250,000 per individual, per bank.
Money invested in stocks, bonds, mutual funds, annuities, life insurance policies, or municipal securities is not FDIC insured, even if you purchase these financial instruments from an insured bank or savings institution.
Does It Matter Where I Purchase My Certificate of Deposit?
Where you purchase CDs can impact the type of insurance coverage that you have on your deposits. For example, a bank certificate of deposit is insured via the FDIC. However, if you purchase CDs at a credit union, then your CD would be covered through the NCUA, or National Credit Union Administration. Similar to the FDIC, the NCUA is charged with supervising and insuring federal credit union deposits. The coverage cap limit of $250,000 applies to the total deposits with one credit union.
Since both the NCUA and the FDIC are backed by the full faith and credit of the U.S. government, the primary difference between the two lies only in the type of financial institution they insure and not the reliability of the actual insurance coverage.
Brokered CDs and FDIC Insurance
A brokered CD can also be considered an FDIC insured CD. Brokered CDs are those that a brokerage firm sells on behalf of a bank. FDIC coverage applies to brokered CDs in the same way it applies to certificates of deposits you purchase from a bank. If the issuing bank fails, then your covered FDIC certificate of deposit will be insured up to the cap limit amount. In this case, however, it may take longer to receive your money back as your information is on record with the brokerage firm and not with the issuing bank.