Does a Savings & Loan Have Deposit Insurance?

The Federal Deposit Insurance Corp., which has provided insurance for money kept in banks since the 1930s, extended its authority to cover S&Ls in 1989. It insures up to "$250,000 per depositor, per insured bank, for each account ownership category." In this case, the term "bank" includes savings and loans, too. Because the insurance applies separately to money held in different types of accounts at different institutions, there's effectively no limit to how much you can insure, as long as you're willing to spread your money around.

The $250,000-per-person limit applies to the total balance in all accounts within an ownership category at a given savings and loan. Categories include single accounts, joint accounts, certain retirement accounts, revocable trust accounts and business accounts. For example, say you have $220,000 in a certificate of deposit, $40,000 in savings and $25,000 in checking, all under your name only, at the same S&L. They add up to $285,000, so $35,000 of that is uninsured. But if these accounts were all joint accounts in both your name and your spouse's name, the money would be fully insured, because each of you is entitled to $250,000 worth of coverage for deposits in joint accounts. If you two had more than $500,000 (congratulations), you could move the extra to a different institution or put it in a different category within the same S&L, such as a savings account under only one of your names, or a retirement savings account. And no, this isn't a shady or sneaky tactic. The FDIC not only tells you to do it, it provides an online tool called EDIE that helps you do it. Institutions pay premiums for federal insurance based on how much money they have in which kinds of accounts.

Generally, FDIC insurance applies to cash on deposit. That includes such things as checking, savings and money market accounts, as well as certificates of deposit. It doesn't apply to stocks, bonds, mutual funds, precious metals or other investments, even if you bought them through the S&L. Stuff you keep in a safe deposit box isn't covered either. Finally, deposits at all branches of a single institution are counted together. If you have $300,000 deposited at the downtown branch of Fred's Savings and Loan, you can't gain extra insurance by moving $50,000 of it to a suburban branch. You've got to take the money to a different institution altogether. Try Barney's Savings and Loan.

Savings and loan deposits used to be insured by a separate agency, the Federal Savings and Loan Insurance Corp., or FSLIC. After interest rates soared in the late 1970s and early 1980s, hundreds of S&Ls failed, because the interest they had to pay depositors to stay competitive was suddenly much higher than the interest they were collecting on mortgages. The failures wiped out the FSLIC's insurance funds, and Congress abolished the agency and put S&Ls under the FDIC as part of a major reform of the savings and loan industry.