It’s now been a couple of weeks since the Silicon Valley Bank failure. Here’s a great article on why SVB failed- When trouble hit, Silicon Valley Bank had to sell US government bonds at a loss. : NPR
What can we learn from this?
It’s important to brush up on our knowledge of what exactly FDIC insurance covers.
The definition states… “The standard insurance amount is $250,000 per depositor, per insured bank, for each account ownership category.”
If you have an account in just your name, then you are insured up to $250,000 if your bank fails. If you have a joint account, then that amount increases to $500,000.
It is important to know if your bank/depository institution is covered by FDIC insurance and then know how much insurance to you have. If you are carrying more in your bank than what is covered by FDIC insurance, then you are taking on unnecessary risk of losing money in the event of your bank failing.
At Nfocus, we utilize a cash sweep program in our brokerage accounts that adds FDIC insurance. This allows us to leverage out multiple banks to access $2.5 million of FDIC insurance for our clients.
Here’s the bottom line- It’s important to know how much FDIC insurance you have at your bank and to keep your deposits below that amount. Otherwise, you are likely taking on unnecessary risk.
