FDIC Insurance for Business – A Resource Guide

Managing business risk is a crucial but complex endeavor. The process is so nuanced that it has spurred decades of research and multiple disciplines dedicated to the best ways to protect companies. Fortunately, there is a simple solution to reduce risk for business cash reserves – insurance from the Federal Deposit Insurance Corporation [FDIC].

You’ve likely heard of the FDIC and the importance of attaining insurance for your cash, but the details of coverage are often opaque. The following overview will guide you through everything you need to know about the program and provide resources to answer your most pressing questions.

What is the FDIC and why was it established?

The FDIC is an independent agency of the federal government tasked with protecting deposits at U.S. banks. They do this through deposit insurance for individual and business cash.

As a federal agency, the FDIC is backed by the full faith and credit of the United States’ government. It is not, however, funded by tax dollars. Instead, funding comes from two different streams – risk-based assessments on member banks and interest on FDIC reserve funds.

The program was established in 1933 following devastating bank failures during the Great Depression that undermined confidence in the banking system. Since that time, the FDIC has been integral in minimizing the impact of banking panics, including the Savings and Loan Crisis of the 1980s, the Financial Crisis in 2008, and the post-pandemic banking turmoil in 2023 – 2024. In fact, no depositor has lost a penny of FDIC insured funds since the program was established.

Additional Resources on The History and Structure of the FDIC:

• Why Was the FDIC Established?
• How is the FDIC Funded?

Additional Resources on Bank Failures and Banking Turmoil:

• A Brief History of U.S. Bank Failures
• An Update on the Banking Industry
• Republic First Failure Reignites Fears of Banking Turmoil

How does a business gain FDIC insurance?

Unlike other types of insurance, businesses do not need to purchase FDIC insurance or pay monthly premiums. Instead, coverage is automatic when investing in certain types of accounts at one of over 4,500 member banks.

The FDIC covers checking, savings, and money market accounts as well as Certificates of Deposit [CDs] up to the applicable limit. On the other hand, the program does not cover securities such as stocks, bonds, or mutual funds – including money market mutual funds.

Additional Resources on FDIC Covered Account Types:

• Types of FDIC Insured Accounts
• Are Money Market Accounts FDIC Insured?
• Are CDs FDIC Insured?
• Comparing the Liquidity of Common FDIC Insured Investments

Additional Resources on Gaining FDIC Insurance for Business:

• FDIC Insurance for Business Accounts
• How Does FDIC Insurance Work for Business?

Limitations on FDIC Insurance

Unfortunately, FDIC insurance is limited in that it only covers $250,000 per ownership category at each insured bank. An ownership category is the type of entity that owns the account, such as an individual or a business.

If your cash at any FDIC member bank is invested in a covered account type and under the $250,000 limit, you can rest assured that it is as safe as possible. In the event of bank failure, the FDIC will work swiftly to return these funds to you either by overseeing the transfer of deposits to a solvent bank or reimbursing the cash from program reserves.

Conversely, any cash above the $250,000 limit is subject to significant risk. If the bank holding the account fails, your company could face a lengthy wait to reclaim cash after the bank assets are sold. Even then, some of your deposits could be lost.

Additional Resources on FDIC Limits:

• FDIC Insurance Limits in 2024
• History and Timeline of Changes to FDIC Coverage Limits

Additional Resources on FDIC Insurance After Bank Failure:

• What Happens to Business Deposits When a Bank Fails?

Can businesses access FDIC coverage above the limit?

The short answer is, yes. Businesses can gain FDIC insurance above the $250,000 limit in a few different ways.

Companies have historically achieved full FDIC protection by opening accounts at multiple FDIC member banks to take advantage of combined coverage. However, this strategy is extraordinarily time-consuming.

Thankfully, there is a simpler solution to gain access to extended deposit protection – deposit management services from ADM. Our solutions spread cash across a nationwide network of financial institutions to help businesses access extended government protection with one account and one consolidated monthly statement.

Additional Resources on Accessing Extended FDIC Insurance:

• Extended FDIC Insurance for Business Deposits
• What is Marketplace Banking™ and How Could It Help Businesses?
• Benefits of Extending FDIC Limits with Marketplace Banking™

Gain Access to Extended FDIC Insurance With ADM

At the American Deposit Management Co. [ADM], we make it simple for your business to achieve full protection for your cash. Our solutions offer access to unlimited government protection from the FDIC or credit union equivalent, NCUA, without the hassle of multiple banking relationships.

In addition to extended safety, our cash management program provides access to nationally competitive returns and a variety of liquidity options to meet your needs. With ADM, you can have it all – unparalleled safety, returns, and access to your cash when you need it. To learn more about our deposit management solutions with access to extended FDIC insurance, contact a member of our team today.

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