Are CDs FDIC Insured?
Certificates of deposit (CDs) are a valuable tool for building financial wellness, and the FDIC insures CDs up to a certain amount. You can increase the amount of money covered by FDIC insurance by diversifying deposit products at multiple insured banks.
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- Updated: September 20, 2022
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What Is FDIC Insurance?
The Federal Deposit Insurance Corporation (FDIC) is a government agency that serves to safeguard the U.S. financial system. Congress created the FDIC in 1933 as a response to the banking crisis of the late 1920s, which wiped out many Americans’ life savings and sparked the Great Depression.
The primary component of the FDIC’s mission is its insurance program, which protects deposits at insured depository institutions (IDIs), such as banks and savings associations. If an IDI were to fail, the FDIC’s insurance gives customers timely access to their insured deposits up to a certain amount.
FDIC insurance covers the money held in deposit products at banks and savings associations, including checking accounts, savings accounts, money market accounts and certificates of deposit (CDs). The insurance does not cover non-deposit investment products such as annuities, stocks and bonds.
How Does FDIC Insurance Work?
FDIC insurance is designed to protect bank customers if a bank fails. It doesn’t happen very often, but financial institutions like banks can take on too much risk and eventually fail, which puts the assets of the bank’s customers in jeopardy.
If this happens to a bank that’s insured, the FDIC will reimburse the bank’s account holders for their deposits up to the limit of $250,000 per account holder. This limit is per depositor, per ownership category the account falls under.
- Single Accounts
- Including checking accounts, savings accounts, certificates of deposit and money market accounts.
- Certain Retirement Accounts
- Including IRAs and 401(k)s.
- Joint Accounts
- Deposit accounts owned by two or more individuals.
- Revocable Trust Accounts
- A revocable trust — like a living trust account — can be revoked, terminated or changed at the direction of the owner(s).
- Irrevocable Trust Accounts
- The owner of an irrevocable trust contributes deposits to the trust account but gives up all power to cancel or change the trust.
- Employee Benefit Plan Accounts
- Including pension plans, defined benefit plans or other employee benefit plans that are not self-directed.
How Much Are CDs Insured For?
The FDIC sets a limit of $250,000 for federal deposit insurance coverage. Coverage is automatic when you open a deposit account at an FDIC-insured bank or financial institution.
This means $250,000 is the limit for all the single accounts a person has at an institution combined. So, if you have $50,000 in a savings account at the same bank that holds your CD, the FDIC will insure your CD for up to $200,000.
Examples of How CDs Are Insured by the FDIC
To better understand the way CDs are covered by FDIC insurance, let’s look at a few examples.
Let’s say you like to keep all your banking accounts in one place. All at the same bank, you have:
- $50,000 in a checking account
- $150,000 in a savings account
- $100,000 in a CD
That’s a total of $300,000 in single accounts. In the event of your bank failing, you could stand to lose $50,000 because the FDIC would only cover these deposits up to $250,000.
If you hold more than $250,000 in insurable products, you can get around the limitations of FDIC coverage by diversifying your CD portfolio with CDs from different banks. For example, if you had:
- $50,000 in a checking account at Bank A
- $200,000 in a CD at Bank A
- $50,000 in a savings account at Bank B
- $150,000 in a CD at Bank B
In total, you would have $250,000 in deposit products at Bank A and $200,000 in deposit products at Bank B. Because FDIC insurance covers up to $250,000 per account holder per bank, you’d be covered for the total amount of your money in both banks.
Understanding how to keep your deposits safe is a crucial component of financial literacy because it means you’re protected against potential pitfalls — like your bank or financial institution failing.
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9 Cited Research Articles
Annuity.org writers adhere to strict sourcing guidelines and use only credible sources of information, including authoritative financial publications, academic organizations, peer-reviewed journals, highly regarded nonprofit organizations, government reports, court records and interviews with qualified experts. You can read more about our commitment to accuracy, fairness and transparency in our editorial guidelines.
- Federal Deposit Insurance Corporation. (2022, February 8). FDIC: Insurance Program. Retrieved from https://www.fdic.gov/about/strategic-plans/strategic/insurance.html
- Federal Deposit Insurance Corporation. (2021, July 1). Are My Deposit Accounts Insured by the FDIC? Retrieved from https://www.fdic.gov/resources/deposit-insurance/financial-products-insured/
- Federal Deposit Insurance Corporation. (2020, September 17). Financial Products That Are Not Insured by the FDIC. Retrieved from https://www.fdic.gov/resources/deposit-insurance/financial-products-not-insured/
- Federal Deposit Insurance Corporation. (2010, July 27). When a Bank Fails - Facts for Depositors, Creditors, and Borrowers. Retrieved from https://www.fdic.gov/consumers/banking/facts/payment.html
- Federal Deposit Insurance Corporation. (n.d.) About the Federal Deposit Insurance Corporation. Retrieved from https://www.fdic.gov/about/
- Financial Industry Regulatory Authority. (n.d.) Certificates of Deposit (CDs). Retrieved from https://www.finra.org/investors/learn-to-invest/types-investments/bank-products/certificates-deposit-cds
- Melendez, S. (2019, December 11). About Banks That Are Not FDIC Insured. Retrieved from https://www.sapling.com/4600324/banks-that-not-fdic-insured
- Office of the Comptroller of the Currency. (2021, April). What Is an Index-linked Certificate of Deposit (CD)? Retrieved from https://www.helpwithmybank.gov/help-topics/investments-trusts/index-linked-certificates-of-deposit/index-linked-cd.html
- White, A. (2020, October 23). How FDIC Insurance Works, Plus a Breakdown of Coverage Limits. Retrieved from https://www.cnbc.com/select/fdic-insurance/