Fdic how does it work

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FDIC insurance is different from other types of coverage where the individual or business pays a fee to an insurer for protection. With FDIC insurance, the bank foots the bill , paying all the necessary premiums without directly passing the cost on to you. And since the inception of the FDIC, depositors at member banks have enjoyed the ultimate protection for their cash, up to the established limit.

Perhaps the most striking evolution is in the amount covered by FDIC insurance. But much has changed since then, especially in recent years, to ensure your company deposits are protected — guaranteed, in fact — by the U.

The responsibility of protecting these funds lies with the FDIC, regardless of the size of the bank. Maintaining an appropriate cash reserve provides businesses with confidence that they will endure the next emergency or economic downturn.

But keeping a large pile of cash on hand comes with its own complications. Once a business decides to increase its level of reserve cash, there are several issues that must be considered. Banks are safe and stable places to store your money. In these rare cases, your money is protected as long as a bank is federally insured.

That means backing by the Federal Deposit Insurance Corp. Credit unions offer this security as well, through the National Credit Union Administration. In , eight banks failed, but during the Great Recession, dozens went under. Still, since the creation of the FDIC, not one cent of insured deposits has been lost. Banks are not insured by default; like most forms of insurance, it comes at a cost. The bank pays the premiums.

FDIC insurance covers deposit accounts — checking , savings and money market accounts and certificates of deposit — and kicks in only in the event a bank fails.