I’ve previously covered the topic of how much of your money is insured in banks. In the meantime, though, amid the deepening of the financial crisis and the accelerated bank failures, the government has stepped up to ease customers’ fears by raising the coverage amount on bank deposits. On top of that, as we all know, wherever there’s risk, there’s also opportunity for profit. As a result, some services have popped up that allow worried customers to maximize the FDIC coverage of their deposits. So how does it work?

Deposit Insurance Explained

How it used to work

Basic Insurance Amount: $100,000 per depositor per insured bank.

Joint account holders got double the insurance and were covered for up to $200,000.

Individual retirement accounts (IRAs) are insured up to $250,000, in addition to the $100,000 of standard FDIC coverage.

Therefore a couple could get up to $700,000 of FDIC coverage by holding a joint account and 2 separate IRA accounts.

This is for a single bank. You can double that coverage by splitting your assets between two different banks (but not two branches of the same bank).

How it works now

Basic Insurance Amount: $250,000 per depositor per insured bank.

Joint account holders get double the insurance and are covered for up to $500,000.

IRAs insurance limits remain unchanged, and are still in addition to the $250,000 of standard FDIC coverage.

So that same couple from the previous example will now get up to $1,000,000 of FDIC coverage.

Of course they could still double the coverage by splitting their assets between 2 different banks.

Stretch Your FDIC-Insured Dollars To The Max!

Is $2,000,000 of FDIC coverage not enough for you? Well you’ll be glad to know that you have options.

Certificate of Deposit Account Registry Service

The Certificate of Deposit Account Registry Service, or CDARS, offers up to $50 million in deposit coverage through its network of roughly 2,500 banks. (Visit www.cdars.com to find a network member near you). You select what maturities (ranging from four weeks to five years) and terms best suit your investment needs. You work with one CDARS network member to secure your large deposits. That home bank takes care of splitting your deposit among as many partner banks as necessary, and you can specify any financial institution you don’t want to use (one you’re already using, for instance). You’ll earn one rate (set by the home bank, no need to negotiate multiple rates or manually tally disbursements for each CD), get one statement (no need to consolidate statements at the end of each month, quarter, or year), and one form at tax time (no need to manually consolidate statements or interest you’ve received).

FolioFn

This online securities firm offers a program that provides the highest coverage of FDIC backed insurance for cash available on the market — covering balances up to $6.25 million for individual accounts, and up to $12.5 million for joint accounts (held by two people). Your cash is automatically distributed (into money-market accounts) for you across many, many different banks — each one of which insures up to $250,000 of cash deposited. That means you can insure up to $12.5 million in cash held in various FolioFn accounts — trading, retirement, trust and so on. Funds are available on demand, so the money earns a relatively low rate — recently just 1.09% at the top end of FolioFn’s range of options. You must be a member — at a cost of $29 a month — to use its extended FDIC coverage. At the time of writing this article, their network was 26 bank strong; as they we add more banks to our program, the amount of FDIC insurance available to their clients is raised automatically.

Got FDIC-Insured Money In the Bank? Take It To The Max!

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