With a handful of bank failures dominating the news recently, you’ve probably wondered exactly what would happen to your money if your financial institution went under. The good news is that most banks are insured by the Federal Deposit Insurance Corporation, or FDIC, which covers up to $250,000 per depositor, per bank. There are also some banks out there that offer full deposit protection. Through the Depositors Insurance Fund, commonly known as DIF, BankFive is able to offer 100% coverage on all deposits, even those in excess of FDIC limits.
Let's take a closer look at FDIC and DIF coverage:
FDIC Coverage
The FDIC was founded in response to widespread bank failures during the Great Depression, generally between 1929 and 1941. President Franklin Roosevelt signed the Banking Act of 1933 to establish the FDIC, regulate the volatile banking industry, and renew the American public’s confidence in banks. Two years later, the Banking Act of 1935 solidified the FDIC as a permanent government agency.
The FDIC is recognized as an independent agency of the United States government that protects you against the loss of your deposits if an FDIC-insured bank or savings association fails. FDIC insurance is backed by the full faith and credit of the U.S. government. Since the FDIC’s creation in 1933, no depositor has ever lost a penny of FDIC-insured deposits.
If an FDIC member bank fails, each depositor of that bank has their deposits covered up to at least $250,000. It’s important to note that FDIC insurance covers only deposit products, including checking accounts, NOW accounts, savings accounts, money market accounts, certificates of deposit (commonly referred to as CDs), and certain retirement accounts. The FDIC does not insure non-deposit investment products or life insurance policies, even if you purchased them through an FDIC-insured institution.
DIF Provides Coverage Over $250,000
While FDIC insurance coverage provides peace of mind, its coverage limits can be worrisome to those depositors who have more than $250,000 in their accounts. BankFive customers, and customers of some other Massachusetts-chartered savings banks, will be happy to know that their deposits are covered in full – above FDIC limits – through the Depositors Insurance Fund (DIF).
The Depositors Insurance Fund was established by the Massachusetts legislature in 1934, and at the time the fund was created, it was as an alternative to the FDIC. In fact, Massachusetts savings banks, by state law, were not allowed to join the FDIC initially.
In 1956, the law was changed to allow Massachusetts savings banks to join the FDIC. For those that did, DIF became known as an excess deposit insurer, meaning they insured deposits in excess of the FDIC limit. By 1986, all DIF member banks had joined the FDIC, so since then, the Depositors Insurance Fund has been solely an excess deposit insurer.
DIF insures all deposits above the FDIC limit in member Massachusetts savings banks. And at BankFive, because our Bristol, Rhode Island location is an extension of our Massachusetts-based bank, deposits made there are covered 100% as well.
Here’s some additional information about DIF:
- No residency requirements. Whether you’re away at school, traveling, or simply living over state lines, there’s no need to worry. Even though DIF is a Massachusetts-based fund, you need not be a resident of the Bay State to take advantage of DIF insurance. You simply must bank with a DIF member bank like BankFive.
- All deposit account types are covered. All types and classes of deposit accounts are covered by DIF insurance, including savings and checking accounts, certificates of deposit (CDs), and money market accounts. DIF insurance also covers our business deposit accounts including Business Checking and Business Money Market accounts.
- It’s automatic. There are no forms or applications required. You automatically receive DIF coverage the minute you make a deposit at a DIF member bank.
For more information about FDIC and DIF coverage, visit:
BankFive.com/DIF
http://www.FDIC.gov
http://www.DIFxs.com