Money insurance and POD accounts

Posted by Matt

My wife taught me something new about FDIC insurance the other day. I thought that they would insure up to $100k in each account, but it turns out that you can get more coverage if you name additional beneficiaries to your accounts. I confirmed this here and found some additional tidbits.

The basic insurance amount is $100,000 per depositor per insured bank. Certain
retirement accounts, such as Individual Retirement Accounts, are insured up to
$250,000 per depositor per insured bank.

All of your single accounts at the same insured bank are added together and the
total is insured up to $100,000. For example, if you have a checking account and
a CD at the same insured bank, and both accounts are in your name only, the two
accounts are added together and the total is insured up to $100,000.

Traditional and Roth IRA accounts are added together and the total is insured
up to $250,000

Also, the site explains Payable-on-death (POD) accounts. My wife and I just discovered these last year when we started our estate planning. I think all of our separately held accounts are now designated as POD for each other and our son. According to our banker, if one of us dies, the account passes directly to the listed beneficiaries (no will, no probate).

My wife pointed out that adding beneficiaries to the account increases the insured amount.

The FDIC insures the interests of each beneficiary up to $100,000 for each
owner if all of the following requirements are met:

• The beneficiary is the owner's spouse, child, grandchild, parent, or
  sibling. Adopted and stepchildren, grandchildren, parents, and siblings also
  qualify. In-laws, grandparents, great-grandchildren, cousins, nieces and
  nephews, friends, organizations (including charities), and trusts do not
  qualify.


• The account title must indicate the existence of the trust relationship by
  including a term such as payable on death, in trust for, trust, living trust,
  family trust, or an acronym such as POD or ITF.


• For POD accounts, each beneficiary must be identified by name in the bank's
  account records.

The site actually has an example where a couple with three children has up to $800,000 of their deposits insured. So, it is possible to keep a great deal of your money in the bank safely, but if you have more than $100k in the bank, please also consider some other investment options (even if it is just a nice boring index fund). Enough in the bank already!