FDIC Insurance Limits Last Changed in 2008. Here's How to Get More Coverage if You Need It

The Federal Deposit Insurance Corporation, or FDIC, was established in 1933 during the Great Depression in order to restore the public's confidence in the U.S. banking system.

Initially, deposits were insured up to $2,500 in 1934, and the limit has increased several times over the years to keep up with inflation and to keep the public's confidence high. In 1980, the limit was increased from $40,000 to $100,000, and it remained that way until the financial crisis in 2008 threatened to cause the U.S. financial system to collapse. In response, Congress approved a temporary increase to $250,000 in FDIC insurance, which was ultimately made permanent.

Although the current FDIC insurance limit is 100 times its initial amount, it still isn't enough to protect all deposits in U.S. financial institutions. Many people have more than $250,000 in savings accounts, and it's quite common for businesses to keep millions of dollars in deposit accounts.

If you need more insurance than the FDIC currently provides, there are several different ways you can get it.

Ways to get more than $250,000 in coverage

The key concept to keep in mind is that the FDIC limit of $250,000 is per person, per institution. And with those italicized words in mind, there are a few ways to potentially get more coverage.

Use multiple banks

Perhaps the most obvious way to get around the FDIC's insurance limit is to use more than one financial institution. For example, if you have $400,000 in a savings account, you could move $150,000 of the money into an account at a different bank in order to stay within the $250,000 limit at each institution. There are some excellent high-yield savings accounts offered by rock-solid banks that make it easy to move money between your accounts.

Open a joint account

Since the FDIC's limit is $250,000 per person, one way around it is to open a joint bank account. For example, if your spouse's name isn't currently on your savings account, adding them would effectively double your FDIC insurance limit to $500,000.

Use a bank that offers excess FDIC insurance

Some banks have decided to take matters into their own hands and offer higher levels of FDIC insurance on their own. The way they do this is essentially the same strategy discussed in the previous section -- by spreading your money among different banks.

As one example, customers with savings and checking accounts at SoFi can get as much as $2 million in FDIC insurance. Customers who opt in can still access their entire account balance through SoFi's platform, but behind the scenes, it will technically be deposited at several banks. Other banks are offering similar programs, and some have even higher limits.

Does the FDIC insurance limit even matter?

Another important question is whether the FDIC insurance limit is simply a symbolic number. In other words, is there any scenario in which a bank would fail and depositors with over $250,000 in their accounts would lose money?

The short answer, based on recent events, is probably not. In the wake of Silicon Valley Bank's collapse, where the bulk of deposits were not covered by FDIC insurance, regulators quickly confirmed that all depositors would be made whole. The U.S. Treasury Department and Federal Reserve both stopped short of saying that a full guarantee would apply to other potential bank failures, but depositors should be aware that the government is unlikely to allow any depositors in U.S. financial institutions to lose their money if the bank doesn't survive.