How to Get the Government to Insure Up to $2 Million of Cash

To most people, FDIC is just four letters you see on the window of your local bank. FDIC is the Federal Deposit Insurance Corporation that functions as an independent agency of the United States government. The FDIC protects against the loss of insured deposits at FDIC-insured banks. FDIC is backed by the full faith of the U.S. government in the case an insured bank fails. FDIC covers deposits in bank checking and savings accounts, money market accounts and certificates of deposits. The FDIC does not cover other accounts offered by banks such as stocks, bonds, mutual funds and annuity products. You can't get any insurance from funds invested in wall Street companies. With the volatility of the financial markets and the failure of banks, you need a more conservative place for your cash. With the right strategy, you can get the U.S. government to insure $2 million of your cash parked in the bank.

Congress has increased the amount of insured deposits from $100,00 to $250,000 per depositor through December 31, 2009. A family of two adults and two children can get up to $2 million insured at just one bank. Here's how: each family member opens an individual account, insuring a total of $1 million. They can hold four more insured joint accounts, each in the name of two family names, insuring a total of $1 million. Combining the individual and joint accounts let the family get deposit insurance on $2 million. The accounts can be checking, savings, money market or certificates of deposits. The FDIC deposit insurance will decrease to $100,000 per depositor on January 1, 2010.

It should be noted there are numerous other accounts covered by FDIC depositor insurance such as IRAs and other retirement accounts, trust accounts, corporation and partnership accounts and others. If any of these apply, you may have $250,000 per depositor for these accounts. It is apparent that FDIC-insured banks do not share this information with their customers.

An additional strategy has been developed by a company, Promontory Interfinancial Network, that makes it easy for a wealthy depositor to keep FDIC-insured cash in separate accounts at multiple banks. Promontory offers customers up to $50 million of FDIC insurance. Promontary has contracts with 2,350 banks. Customers tap into Promontary's network through their home banks. Promontary arranges for customer's money to be divided among participating banks, with each bank receiving less than the $250,000 so all cash is FDIC insured. The receiving banks pay Promontory a fee, and in return, Promontory directs deposits to them. Individuals can do this themselves but it will be a tedious task. Promontory is doing the legwork at no additional cost to customers.

Promontory calls it system CDARs, an acronym for certificates of deposit account registry service. This service really has eliminated any need to increase the FDIC coverage amount as CDARs works around the ceiling amount of $250,000 per depositor. Why track down 10 or 20 banks when Promontory can do the work for you at no additional cost.

The most important lesson here is to protect your cash with FDIC insurance. There is no need to park cash in any bank that is not FDIC insured. We have already seen banks fail and there could be more bank failures in the near future. The only way to truly protect your cash is to get the U.S. government to insure it through your local bank.