What is FDIC Insurance?
FDIC insures all types of deposits received by a financial institution in its usual course of business. For example, savings and checking accounts and time deposits (including certificates of deposit, "CDs") are all subject to FDIC insurance coverage. Cashiers' checks, officials' checks, expense checks, loan disbursement checks, interest checks, outstanding drafts, negotiable instruments and money orders drawn on the institution are also considered deposits, and so are also protected by FDIC. Collectively, these types of instruments are referred to as "official checks." For example, a cashier's check is a type of official check.
Certified checks, letters of credit, and travelers' checks, for which an insured depository institution is primarily liable, also are insured when issued in exchange for money or its equivalent, or for a charge against a deposit account.
What is not insured by the FDIC?
The FDIC does not insure the money individuals invest in stocks, bonds, municipal bonds, or other securities; mutual funds, (including money market mutual funds, and mutual funds that invest in stocks, bonds and other securities); annuities (which are contracts underwritten by insurance companies that guarantee income in exchange for a lump sum or periodic payment); or insurance products such as automobile and life insurance even if these products were purchased at an insured bank or through an affiliated broker/dealer/insurance agent that is offering these products on behalf of a bank.
The FDIC does not insure U.S. Treasury bills, bonds, or notes, but these are backed by the full faith and credit of the U.S. Government.
Also, the FDIC insurance doesn't cover valuables in safe deposit boxes. These contents, however, may be covered either by the bank's private insurance or the box holder's personal homeowner's insurance.
Furthermore, the FDIC does not insure against loss of funds due to robberies and other thefts. Stolen funds may be covered by what's called a bank's Hazard and Casualty insurance, which is a policy a bank purchases to protect itself from fire, flood, earthquake, robbery, and physical damage. In those rare instances where a bank employee may tamper with a customer's account, the bank's blanket bond insurance (also called fidelity bonds) may cover the loss and the funds would be returned to the customer. Consumer protection laws such as the Electronic Funds Transfer Act offer protections if a third party somehow gains access to a customer's account.
For more information do not hesitate to contact us.