Each depositor insured to at least $250,000 per insured bank

“The FDIC is considering this simplification of the insurance rules as part of our ongoing effort to help depositors know whether they have funds over the $100,000 insurance limit and act, if necessary, to protect their savings,” said FDIC Chairman Donna Tanoue.

 Consumers run the risk of losing money in a bank or thrift failure if they mistakenly believe their funds are within the $100,000 insurance limit. Joe DiNuzzo, an FDIC attorney in Washington, says the proposed changes to the rules for joint accounts and POD accounts “would strike at the source of the remaining confusion that bankers and consumers have about deposit insurance.”     

Remember, these are only proposed changes. The current rules for joint accounts and POD accounts will remain in effect until any changes are final. Also, if you and your family have less than $100,000 in deposits at any one institution, you don’t need to be concerned about the specifics here. Your money certainly will be fully protected within the $100,000 limit. In general, here’s what’s under consideration…

• Joint accounts are owned by two or more people. Let’s say two people own joint accounts totaling $200,000. Under current rules, the funds would be insured to $100,000, not $200,000, as many people mistakenly believe. That’s because the rules say that all joint accounts owned by the same combination of people at an insured institution are added together and insured up to $100,000 in total. To deal with this confusion, the FDIC is considering changing the maximum insurance coverage that one group of people can have in joint accounts—from $100,000 in total to $100,000 for each person. However, what would not change is another part of the joint account rules—one that says each person’s shares in all joint accounts at that same institution are added together and insured up to $100,000.

•    Payable-on-death accounts (also known as “in trust for” accounts or revocable trust accounts) are those where the funds will be paid to one or more named beneficiaries upon the death of the owner. The current rules say that a person’s POD accounts will be insured up to $100,000 for each “qualifying” beneficiary, defined as the owner’s spouse, children or grandchildren (including adopted and “step” children and grandchildren). This means a POD account that lists a spouse and two children as the beneficiaries would be insured for up to $300,000, not just $100,000. But to clarify who can be a qualifying beneficiary on a POD account (and thus make the account eligible for special insurance coverage), the FDIC has proposed to add parents and siblings to the list.