The Federal Deposit Insurance Corporation, the federal agency that backs bank deposits, reported a 52% increase from the prior year in the number of banks that are in trouble. Regulators are expecting about 200 bank failures in the coming year or two. If that occurs, it could rival the flood of bank failures seen during the S&L crisis, says Jaret Seiber, the financial services analyst for policy research firm Stamford Group. In 1989, the nation saw a post-Depression era record of 206 bank failures. You can protect yourself by understanding if your account is insured and by how much with these facts:
FDIC (Federal Deposit Insurance Corporation) insures accounts for $100,000 per depositor, per institution. For example, if you and your spouse have two accounts that each totaled $75,000, then you both would be covered (each under $100,000). But if one spouse also had a sole proprietor business account at the same bank for $50,000, then he/she would not be covered for $25,000 (75,000 and $50,000 is over the $100,000 limit). A business’s deposit account is treated as personal money.
Corporations and partnership are treated like individual depositors. For example, your corporation could have an account insured up to $100,000 and you could also have your personal account insured up to $100,000 at the same institution. Every corporation and partnership is given $100,000 of protection per institution, regardless of the number of partners, or owners.
There are many types of accounts that are not insured at banks and savings and loans. They are mutual fund, stock, bonds, annuities or other investment accounts.
The majority of banks will merge or be bought out before they fail and you probably won’t even notice. But it can take a very long time to get your money if you get stuck with one that does fail, and uninsured account balances can receive as little as 50 cents on the dollar.
Spread your accounts over different financial institutions for safety and if you aren’t sure about the financial condition of your bank or savings and loan, call toll-free at 1-877-ASK-FDIC for more information.
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Fern Alix-LaRocca is a Certified Financial Planner with over 24 years experience as a fee-only Financial Advisor. Stop losing money and increase your net worth by subscribing to her free e-newsletter at http://www.401kmaximum.org and get the free report- The 9 Biggest 401k Mistakes You Can Make when you sign up.