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Most certificates of deposit (CDs) are federally insured by the Federal Deposit Insurance Corporation (FDIC), an independent agency that provides deposit insurance and maintains the safety of the U.S. banking system. Deposits at FDIC-insured banks are covered up to $250,000 per person per account ownership type and up to $500,000 for a joint account.
Similar to the FDIC, the National Credit Union Administration (NCUA) insures CD deposits for credit union customers up to $250,000 per credit union per account owner.
However, there are CD accounts that don't carry deposit insurance even when held at an FDIC member bank. Uninsured CDs may include: foreign CDs, Brokered CDs, and Yankee CDs.
If your bank fails, the FDIC steps in to guarantee the insured amount in existing deposit accounts. The FDIC will first search for another bank willing to assume the insured accounts. When it isn't possible to transfer or sell deposits, the FDIC reimburses account holders according to insurance limits - up to $250,000 per member bank per depositor in each account ownership category.
For example, if you have a CD with a principal balance of $195,000 and $5,000 in accrued interest, the full $200,000 would be protected (provided your bank is FDIC-insured). However, if you have $300,000 in a CD, only $250,000 would be protected. The remaining $50,000 would be uninsured.
CD accounts are low-risk accounts with an acceptable balance between return and risk. To minimize your risks, you should confirm your CD account is FDIC insured and understand when you might be taking on added risk.
