Extra Bank FDIC Insured Coverage - Two Solutions



Posted: Wednesday, August 06, 2008

by
AngryBroker.com

$100,000 in bank FDIC coverage may be fine for many, but in Retirement Planning the need for expanded FDIC insurance on bank accounts is common. Nobody wants to end up like the hapless IndyMac depositors that were only given access to half of their uninsured deposits after the FDIC took over the bank. First thought on every depositors mind was "What happened to my money?" The next thought should have been "How to I prevent this from EVER happening again?"

Here are two ways to get expanded coverage over and above the $100,000 per account (or $250,000 per self-directed retirement account). The most commonly used approach is the "multiple-accounts" method. Simply stated, you set up multiple accounts, with different names and/or different owners to expand the coverage. It sounds simple, but remember -- the government is involved here!

The FDIC states that coverage is based on the account owner's "right and capacity." Any accounts for which the owner of the account has the same "right and capacity" are totalled to determine FDIC coverage. Single ownership has one right and capacity, and joint ownership represents another right and capacity. A Revocable Living Trust has another right and capacity. Ditto a corporation or partnership.

A good explanation of the sometimes convoluted process of setting up multiple accounts can be found on the FDIC website's "Financial Institution Employee's Guide" which was written for bank's employees to use when setting up multiple accounts for maximum FDIC coverage. But be prepared... it's not always easy to grasp on the first (or second, or third) run-through.

Is there a simpler way to get more bank FDIC coverage? Absolutely.

The second, and little known, method to increase your bank FDIC coverage is by using a "Deposit Placement Agreement" through a participating institution. You make one deposit into one account and have 100% FDIC coverage on the full amount. Currently you can get full FDIC coverage up to $50 Million Dollars. Currently there are around 2,000 institutions across the country (mostly banks and brokerage firms) that offer this service, called "Certificate of Deposit Account Registry Service" or ""CDARS."

You make the deposit, and then they do all the work. You'll have one rate on your investment, it will all be tracked on one statement, and you will have your savings FDIC insured for up to $50 million dollars. Simple and easy.

Why hasn't your Retirement Planning Advisor told you about this? Or your banker, or stockbroker? Hmmm... could it be that their company doesn't offer the service? The Nissan salesman isn't going to send you down the street to buy a Toyota, is he? And even if a CDARS account is an available option with your financial advisor or banker, the payouts and bonuses for the salesman aren't nearly as juicy as they are for that 'in-house' certificate of deposit, mutual fund, or variable annuity.

Horatio Whistleblower is an active financial planner who has decided to reveal the hidden underside of Retirement Planning, Mutual Funds, Banks, Stockbrokers, and Financial Planning in general. To find out the #1 ethical test that almost all Retirement Planning Advisors, Insurance Agents, Mutual Funds, Banks and Stockbrokers fail, visit Horatio at AngryBroker.com
This Article has been viewed 63 times. (Not updated in real-time.)
No comments yet.
We want your comments! If you can read this, you don't have javascript enabled, so you can't use this comment system. Please enable javascript.