When you deposit your money into a bank, you generally assume that it's safe. Even if the bank itself fails, the FDIC, a government agency, steps in to cover at least some of the loss. But this coverage isn't infinite -- even if you put your money in a seemingly protected account, you may be liable for a loss. Prepare yourself, depositor -- winter (might be) coming.

Deposit insurance 101: What's covered and what's not
If a bank fails, the Federal Deposit Insurance Corporation will pay you the funds you're owed, on demand, up to a certain limit. This program was designed to prevent bank runs, where panicked people think a bank is on the brink, try to withdraw their money all at once, and actually cause the bank to fail.

The FDIC covers bank deposits; credit unions get their insurance from the National Credit Union Share Insurance Fund (NCUSIF), which is operated by the National Credit Union Association.

The following types of funds come with FDIC/NCUSIF insurance

CategoryFDIC examplesNCUSIF examples
Single/joint account Checking accounts Share draft accounts
Savings accounts Share savings accounts
Certificates of deposit (CDs) Share certificates
Money market accounts (which are not
the same as money market funds)
Money market share accounts
Health savings accounts without named beneficiaries
Certain retirement accounts SIMPLE, SEP, traditional and Roth IRAs; and
self-directed Keogh plans and 401(k)'s
Revocable trust accounts Living or family trust, payable-on-death

The following types of accounts are NOT insured:

  • Investments such as stocks, mutual funds and money market funds
  • Insurance products
  • Safety deposit box contents
  • Employer-directed 401(k)s and Keogh, pension and profit-sharing plans that aren't allocated to bank deposits
  • Health savings accounts with a named beneficiary (considered an irrevocable trust)
  • Coverdell Education Savings Accounts (sometimes known as Education IRAs)
  • Some prepaid debit cards: though a few prepaid issuers give FDIC insurance, it's purely voluntary on their part

What are the coverage limits?
In 2008, responding to fears of a bank run, the FDIC raised its insurance limit from $100,000 to $250,000; in 2010, the Dodd-Frank bill made the increase permanent. So, post-financial crisis, you're covered up to the first $250,000 you put into each bank? Would that it were so simple.

The FDIC and NCUSIF count each category of account separately, and moreover, they count joint and single ownership separately. This means that your single ownership deposit accounts are insured up to $250k, and your joint accounts are insured up to $250k per co-owner. Finally, revocable trust accounts are insured up to $250k per unique beneficiary. Got all that? If you're still unsure about whether your money is safe, our friends Ned and Cat Stark are here to help.

Safe savings in an unsafe world
We'll walk through a few examples of various accounts and beneficiaries at the same bank and show how together, Ned and Cat manage to ensure nearly $3 million.

Pooling between categories and ownership
As a single owner, Ned's deposits are insured up to a total of $250,000.

CategoryAccount TypeOwnerBene-
BalanceInsured AmountUninsured Amount
Single Account Checking Ned N/A $200,000 $250,000 $50,000
Savings Ned N/A $100,000
    Total 0 $300,000 $250,000 $50,000

His retirement accounts are also grouped together:

CategoryAccount TypeOwnerBene-ficiariesBalanceInsured AmountUninsured Amount
Retirement Account Roth IRA Ned N/A $200,000 $250,000  
Traditional IRA Ned N/A $100,000    
    Total 0 $300,000 $250,000 $50,000

Note: Naming more beneficiaries to your retirement account does not increase the insurance amount.

CategoryAccount TypeOwnerBene-ficiariesBalanceInsured AmountUninsured Amount
Retirement Account Roth IRA Ned Robb and Sansa $200,000 $250,000 $50,000
Traditional IRA Ned Arya and Bran $100,000
    Total 4 $300,000 $250,000 $50,000

Separating joint and single ownership
But if Ned has a joint account with his wife, Cat, the joint account limit is treated separately from the individual limit.

CategoryAccount TypeOwnerBene-ficiariesBalanceInsured AmountUninsured Amount
Single Account Checking Ned N/A $200,000 $200,000  
Joint Account Savings Ned and Cat N/A $300,000 $300,000  
    Total 0 $500,000 $500,000 $0

It works out like this:

The total of Ned's singly owned deposit accounts is $200,000, less than the $250k limit. Joint accounts are insured up to $250k per co-owner, and are counted separately from singly owned accounts. Since Ned and Cat co-own the account, it's ensured up to $500,000.

Separating categories of accounts
Your trust, retirement and deposit accounts have separate limits, so even though the sum total of all your money in those accounts might exceed $250,000, each category is considered on its own.

CategoryAccount TypeOwnerBene-ficiariesBalanceInsured AmountUninsured Amount
Single account Checking Ned N/A $100,000 $200,000  
HSA Ned N/A* $100,000
Retirement Account Roth IRA Ned N/A $100,000 $100,000  
    Total 0 $300,000 $300,000 $0

*If Ned had named a beneficiary, the account would not be insured.

Separating ownership and category together
By taking advantage of both the category and ownership distinctions, Ned and Cat can get substantially more than $250,000 in insurance:

CategoryAccount TypeOwnerBene-ficiariesBalanceInsured AmountUninsured Amount
Single Account Checking Ned N/A $100,000 $100,000  
Joint Account Savings Ned and Cat N/A $200,000 $200,000  
Retirement Account Roth IRA Ned N/A $100,000 $100,000  
Retirement Account Traditional IRA Cat N/A $250,000 $250,000  
    Total 0 $650,000 $650,000 $0

Revocable trust accounts
Revocable trust accounts are insured for up to $250,000 per unique beneficiary. This gets a bit complicated when a family has multiple living trusts and the same beneficiaries:

CategoryAccount TypeOwnerBene-ficiariesBalanceInsured AmountUninsured Amount
Revocable Trust Ned and Cat Living Trust Ned and Cat Robb and Sansa $400,000 $400,000  
Cat Payable on Demand Cat Robb and Sansa $500,000 $300,000  
    Total 2 $900,000 $700,000 $200,000

This one is pretty confusing: Each account has two beneficiaries, so why isn't each account insured for $500,000? It's because the FDIC and NCUSIF break out limits by ownership, not beneficiary. This table makes it clearer:

Owners Beneficiaries Owner's Share Insured Amount Uninsured Amount
Ned Robb and Sansa $200,000 (=$400,000/2) $200,000 $0
Cat Robb and Sansa $700,000 (=$400,000/2 + $500,000) $500,000 $200,000

Ned's share is insured up to $250,000 per beneficiary, and Cat's is too. But since Cat owns half the assets of the Ned and Cat Living Trust, the total of her revocable trusts exceeds the $500,000 limit.

Put it all together
If you mix and match ownership and account type, and have a lot of kids, you can blow the $250,000 limit out of the water.

Category Account Type Owner Bene-ficiaries Balance Insured Amount Uninsured Amount
Single Account CD Ned N/A $250,000 $250,000  
Joint Account Savings Ned and Cat N/A $250,000 $250,000  
Single Account CD Cat N/A $250,000 $250,000  
Retirement Account Roth IRA Ned N/A $250,000 $250,000  
  Traditional IRA Cat N/A $250,000 $250,000  
Revocable Trust Ned and Cat POD Ned and Cat

Bran, Rickon

$1,500,000 $1,500,000  
    Total 6 $2,750,000 $2,750,000 $0

You can also spread out your deposit insurance by depositing into different banks. If two banks merge, the limits are treated separately for at least six months, giving you time to restructure your accounts.

Note that a named beneficiary must be a living person or an IRS-recognized non-profit or charity -- no dead folks. Ned and Cat's total insured amount gets lower and lower as the seasons go on.

Should I worry about bank failures?
If your funds are not FDIC- or NCUSIF-insured and your bank goes under, you might be in for a lot of trouble. On average, depositors got back 72% of their funds from failed banks. It's worth spreading out your funds over different banks and taking advantage of the ownership and category differentiations so that your funds are secured.

High-net-worth folks can use a service called CDARS (Certificate of Deposit Account Registry Service), which spreads out your money for you so you're always covered. However, some contend that rates on CDARS deposits aren't as good as ordinary accounts. Honestly, you might be better off doing the research yourself.

Anisha Sekar is the chief consumer advocate at NerdWallet, a website dedicated to unbiased advice, transparent recommendations and consumer education. Her direwolf is named Bernanke.