| |
6 ideas for insuring your deposits |
| By Laura Bruce • Bankrate.com |
|
As consumers continue to be rattled by a seemingly bottomless pit of bad financial news, they're looking for ways
to ensure their entire bank deposits are covered by the Federal Deposit Insurance Corp.
It's not difficult to exceed the $100,000 limit on individual accounts, or the $250,000 limit on certain retirement
accounts. In fact, the FDIC says that less than 62 percent of the $6.88 trillion on deposit in FDIC-insured banks was covered at the
end of 2007. That leaves more than $2.5 trillion unprotected in the event of bank failures.
Fortunately, there are many ways you can have excess
deposits covered, and you should take the trouble to use one of
these methods or, through your own research, find other ways. Uninsured
depositors receive an average of 72 cents on the dollar when their
bank fails. Imagine having excess money in a bank and losing more
than a quarter of it. In addition, it can take years for the FDIC
to settle a bank failure.
The six examples of excess deposit coverage that we'll
highlight here primarily involve accounts at community or state-chartered
banks. Some larger institutions carry their own excess deposit insurance,
so if you prefer banking at larger institutions, ask if they have
it. Companies such as BancInsure and Progressive Casualty Insurance
provide excess deposit insurance to financial institutions. Excess
share insurance is available to credit unions. But don't assume
you're covered -- always ask.
| With $2.5 trillion in uninsured
deposits sitting in U.S. banks, millions of people are leaving
the security of their savings to chance. Here's how to
make sure you don't get stuck with 72 cents on the dollar
if your bank fails. |
|
 |
|
1. Depositors Insurance Fund, or DIF
Believe it or not, back in the 1930s, Massachusetts state-chartered
savings banks and state-chartered cooperative banks were prohibited
from belonging to the FDIC. Instead, they were required to belong
to the DIF, which, back then, functioned under a different name. Over
time, the state legislature allowed the state-chartered institutions
to also have FDIC insurance. The DIF then became the insurer of
excess deposits. Any amounts above FDIC coverage are guaranteed.
There are no forms to fill out, and no separate titling of accounts
is necessary. The DIF program covers 68 state-chartered savings
banks.
The Share Insurance Fund, or SIF, provides the same coverage for state-chartered
cooperative banks.
If you don't live in Massachusetts, you're not left out: Many of these banks allow out-of-state accounts.
"The insurance is unlimited, but we don't have $10 million customers," says David Elliott, CEO at Depositors Insurance
Fund in Woburn, Mass. "When we look at our profile, it's an amount slightly above the FDIC limit. The customer, whose account started
with $90,000 and through interest is up to $125,000, may not even be aware of the fact that the FDIC is insuring the first $100,000 and
we're insuring the $25,000 above that."
2. Certificate of Deposit Account Registry Service, or CDARS
If you like the safety and convenience of CDs and you're nearing the FDIC limit, you may want to consider the CDARS program, if your
bank offers it.
Funds above $100,000 are deposited in CDs at other banks in the network. The system is supposed to ensure the money is divided among nonrelated banks, but you should check to be certain. If you're wealthy enough, you can insure up to $50 million.
The demand for the CDARS program has grown considerably this summer, according to Mark Jacobsen, president of Promontory
Interfinancial Network, the company that created CDARS.
|
