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Important Update: Changes in FDIC Deposit Insurance Coverage

The FDIC deposit insurance rules have undergone a series of changes starting in the fall of 2008. As a result, certain previously published information related to FDIC insurance coverage may not reflect the current rules. For details about the changes, visit Changes in FDIC Deposit Insurance Coverage. For more information about FDIC insurance, go to www.fdic.gov/deposit/deposits/index.html or call toll-free 1-877-ASK-FDIC (1-877-275-3342). For the hearing-impaired, the number is 1-800-925-4618.


Fall 2004
Risky Business

Here are some common misconceptions about the insurance coverage of business accounts.

Deposits for a homeowners association are insured up to $100,000 for each member of the organization. Wrong. The coverage is $100,000 in total. The funds are owned and used by the association, not by the individual members.

Partnership accounts are covered to $100,000 per partner. No, the deposit insurance applies to the partnership, not the individual partners. The partnership's accounts are insured to $100,000 in total.

Deposits held by a sole proprietorship are separately insured from the business owner's personal accounts. Incorrect. Under the FDIC's rules, they are added to any individual accounts the owner has at the same bank and insured up to $100,000.
Basics of Deposit Insurance for Businesses

The FDIC receives many questions about deposit insurance from businesses and other entities that want to know if all their money would be fully protected if their bank were to fail.

If you own a business or manage the money of a non-profit organization, here are some basics you should know about your FDIC insurance coverage.

Deposits of a corporation, partnership or "unincorporated association" (such as a religious organization, charity or homeowners association) are insured up to $100,000 in total. These business-type accounts, though, are insured separately from any personal accounts of the entity's stockholders, partners or members held at the same institution.

"The FDIC gets calls, for example, from corporations or partnerships asking if it is possible to keep more than $100,000 in a bank and still be fully insured," said Martin Becker, an FDIC senior specialist on deposit insurance. "The answer is no — it's $100,000 of insurance to the corporation alone or the partnership alone. The insurance coverage doesn't increase based on the number of owners."

To quality for coverage of up to $100,000 of FDIC insurance separate from the personal deposits of the owners or officials, the organization must be engaged in an "independent activity." That means the entity cannot exist solely for the purpose of increasing the deposit insurance coverage of the owners.

Note: While a corporate account is insured for up to $100,000 in total, funds held in connection with employee benefit plans, such as pension or profit-sharing plans, might qualify for coverage up to $100,000 for each employee's share if FDIC requirements for this separate coverage are met.

In addition, a corporation's accounts for different purposes (such as one account for research projects and another for a building project) are each separately insured to $100,000 only if they belong to separately incorporated subsidiaries or units. Otherwise, they are added to any other deposit accounts of the corporation and the total is insured up to $100,000.

Deposits of a sole proprietorship are insured together with any personal funds the business owner may have at the same bank. A sole proprietorship is a business owned by just one individual rather than a corporation or partnership. Many small stores or service companies operate as sole proprietorships.

Unlike corporations or partnerships, if you are the sole proprietor of a business, your personal and business accounts at the same institution are insured together as individual accounts up to $100,000 in total.

If you have questions about your insurance coverage, call or write the FDIC as listed on the next page. Also read the deposit insurance information posted on the FDIC Web site at www.fdic.gov/deposit/deposits/index.html. Single copies of selected publications, including Your Insured Deposits - FDIC's Guide to Deposit Insurance Coverage, are available free of charge by completing the online order form at www2.fdic.gov/depositinsuranceregister or by contacting the FDIC's Public Information Center.


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Last Updated 11/19/2004 communications@fdic.gov