Peace of mind. That’s what you want when you place your money in a bank or savings institution. You want to know that your money is safe and sound, and chances are you’ve heard about FDIC insurance and know that it’s there to protect your dollars. What you may not know is exactly what the coverage limits are with FDIC insurance, and that there are full-coverage options available for your deposits – outside of the FDIC.
Most U.S. banks are members of the FDIC, or the Federal Deposit Insurance Corporation. The purpose of the FDIC is to protect your deposits in the event of a bank failure. If an FDIC-insured institution fails, each customer there will have their deposits protected, up to $250,000. FDIC insurance covers all types of deposit accounts, including certificates of deposit (also known as CDs), checking and savings accounts, as well as money markets and some types of retirement accounts. It does not however cover investment accounts such as stocks, bonds or mutual funds, or life insurance policies, even if you purchased those products from an FDIC-insured bank.
FDIC insurance is backed by the full faith and credit of the U.S. government, and since the FDIC’s creation, no depositor has ever lost a penny of their FDIC-insured deposits. But what about depositors that have more than $250,000 in a bank account? One way to insure excess deposits is through the Depositors Insurance Fund – commonly referred to as DIF.
The Depositors Insurance Fund is a private insurance fund that provides supplemental protection for funds deposited with Massachusetts-chartered savings banks. The good news is that if you don’t live in Massachusetts, you can still reap the benefits of DIF coverage. The Depositors Insurance Fund does not impose any residency restrictions, so as long as a DIF member bank accepts out-of-state deposits, you can open an account there and have your deposits covered in full.
Another way to obtain DIF coverage is to open an account with an online bank that is tied to a Massachusetts-chartered savings bank. For example, Bank5 Connect is an online bank that is a division of BankFive, a DIF member bank located in Fall River, Massachusetts. So, all deposits placed in a Bank5 Connect account are covered by DIF, regardless of which state the depositor resides in.
When you open a deposit account at a DIF member bank, DIF insurance automatically kicks in. There are no forms or applications to fill out, and there are no fees or surcharges required to obtain coverage.
In the event of a bank failure, the Depositors Insurance Fund works very closely with the FDIC. After a bank goes under, the priority for both organizations is to ensure depositors get their funds as quickly as possible. In addition, the DIF and the FDIC work together to determine what portion of the deposits are the FDIC’s responsibility and what portion will be paid out by the DIF.
To learn more about DIF coverage at Bank5 Connect, click here.
For more general information about FDIC and DIF coverage, go to: