Subscribe to Inc. magazine

How Much Are You Covered For?

How to ensure that your deposits are properly insured.

It's widely known that the Federal Deposit Insurance Corp. insures deposits up to $100,000. But what happens if a company and its owner maintain a variety of accounts at the same bank? To what extent are the assets protected in the event of a problem? We asked David C. Cates, chairman of Ferguson & Co., a Washington, D.C., company that specializes in bank-risk analysis and data publishing. Here are his findings:

* Corporate accounts. From the standpoint of the FDIC, Cates says, a company's payroll account and other accounts used for business transactions and short-term investments are viewed as one account. This is true even if they have different account titles. The insurance limit, therefore, is $100,000. If your balance exceeds that level in the course of the day, Cates says, it's prudent to instruct your bank to "sweep" the account down to the $100,000 level -- in other words, invest excess funds -- at the close of business each day. Even if the account is swept, you still need to be attentive to where the money is being invested.

* Trust accounts. The assets of trust accounts aren't seen as deposits. So if a bank fails, Cates says, those assets are generally immune to government seizure. One notable exception: if the assets are held in certificates of deposit of the failed bank, for insurance purposes they are considered deposits. In the case of employee-benefits trusts, insurance would protect the CD investment up to $100,000 per beneficiary, Cates says.

* Personal accounts. Under the rules, your personal account is insured up to $100,000, as are the individual accounts of your spouse and your children. If your balances exceed the insured limit and you have concerns about the safety of the bank, it's a good idea to have accounts in more than one institution. -- Bruce G. Posner

Last updated: Jun 1, 1991

Register on today to get full access to:
All articles  |  Magazine archives | Livestream events | Comments

Or sign up using: