FDIC Limits and How to Insure Excess Deposits

Peace of mind. That’s what you want when you place your money in a bank or savings institution. You want to know that your money is safe and sound, and chances are you’ve heard about FDIC insurance and know that it’s there to protect your dollars. What you may not know is exactly what the coverage limits are with FDIC insurance, and that there are full-coverage options available for your deposits – outside of the FDIC.fdic-limits-insure-excess-deposits

Most U.S. banks are members of the FDIC, or the Federal Deposit Insurance Corporation. The purpose of the FDIC is to protect your deposits in the event of a bank failure. If an FDIC-insured institution fails, each customer there will have their deposits protected, up to $250,000. FDIC insurance covers all types of deposit accounts, including certificates of deposit (also known as CDs), checking and savings accounts, as well as money markets and some types of retirement accounts. It does not however cover investment accounts such as stocks, bonds or mutual funds, or life insurance policies, even if you purchased those products from an FDIC-insured bank.

FDIC insurance is backed by the full faith and credit of the U.S. government, and since the FDIC’s creation, no depositor has ever lost a penny of their FDIC-insured deposits. But what about depositors that have more than $250,000 in a bank account? One way to insure excess deposits is through the Depositors Insurance Fund – commonly referred to as DIF.

The Depositors Insurance Fund is a private insurance fund that provides supplemental protection for funds deposited with Massachusetts-chartered savings banks. The good news is that if you don’t live in Massachusetts, you can still reap the benefits of DIF coverage. The Depositors Insurance Fund does not impose any residency restrictions, so as long as a DIF member bankAs a courtesy, you will be leaving Blog.Bank5Connect.com and going to another website. We have approved this site as a reliable partner, but you will no longer be under the security policy of Bank5Connect.com. Come back soon! accepts out-of-state deposits, you can open an account there and have your deposits covered in full.

Another way to obtain DIF coverage is to open an account with an online bank that is tied to a Massachusetts-chartered savings bank. For example, Bank5 Connect is an online bank that is a division of BankFive, a DIF member bank located in Fall River, Massachusetts. So, all deposits placed in a Bank5 Connect account are covered by DIF, regardless of which state the depositor resides in.

When you open a deposit account at a DIF member bank, DIF insurance automatically kicks in. There are no forms or applications to fill out, and there are no fees or surcharges required to obtain coverage.

In the event of a bank failure, the Depositors Insurance Fund works very closely with the FDIC. After a bank goes under, the priority for both organizations is to ensure depositors get their funds as quickly as possible. In addition, the DIF and the FDIC work together to determine what portion of the deposits are the FDIC’s responsibility and what portion will be paid out by the DIF.

To learn more about DIF coverage at Bank5 Connect, visit http://www.bank5connect.com/home/misc/fully-insured-deposits.

For more general information about FDIC and DIF coverage, go to:

http://www.FDIC.govAs a courtesy, you will be leaving Blog.Bank5Connect.com and going to another website. We have approved this site as a reliable partner, but you will no longer be under the security policy of Bank5Connect.com. Come back soon!

http://www.DIFxs.comAs a courtesy, you will be leaving Blog.Bank5Connect.com and going to another website. We have approved this site as a reliable partner, but you will no longer be under the security policy of Bank5Connect.com. Come back soon!

 

 

A Comprehensive Blanket of Insurance Covers Bank5 Connect Deposit Accounts

If you enjoy the convenience and features that Bank5 Connect has to offer, here’s another bonus that comes with our online-only banking – all your deposits are insured in full.AdobeStock_60654093

There’s no need to worry that your deposits are at risk at any time. When you place your money in a Bank5 Connect account, you can be assured that every penny is totally covered by deposit insurance.

That’s because Bank5 Connect is a Federal Deposit Insurance Corporation (FDIC) and Depositors Insurance Fund (DIF) member bank. This means each depositor is insured by the FDIC to $250,000. All deposits above this amount are covered by the DIF.

Simply put, there are no gaps in insurance coverage for Bank5 Connect customers’ deposit accounts. That’s about as risk free as you can get.

Plus, there is no dollar limit to the DIF’s coverage – the Fund covers everything above the FDIC limit of $250,000. What’s more, all deposits placed in a Bank5 Connect account are eligible for DIF coverage. That includes checking accounts, savings accounts, and certificates of deposit.

Another great feature of DIF coverage? There are no forms or applications to fill out to receive the insurance. It’s automatic and free.

Since the inception of both insurance programs, no depositor has ever lost a penny of FDIC- or DIF-insured deposits. That in itself is a remarkable track record.

How and why did each program come about? Here’s a quick overview.

The DIF was established by the Massachusetts legislature in 1934 as an alternative to the FDIC. At that time, Massachusetts savings banks, by state law, were not allowed to join the FDIC.

However, the law was changed in 1956 to allow Bay State savings banks to join the federal insurance program. For those that did, the DIF became known as an excess deposit insurer, meaning the Fund insured deposits in excess of the FDIC limit. By 1986, all DIF member banks had joined the FDIC.

Even though state law created the DIF, it is a private deposit insurance company and not backed by the state or federal government.

On the other hand, the FDIC is an independent agency of the United States government that protects you against the loss of your deposits if an FDIC-insured bank or savings association fails. FDIC insurance is backed by the full faith and credit of the U.S. government.

The FDIC was created as a result of widespread bank failures during The Great Depression in the 1920s and 1930s. In addition to establishing the agency, the Banking Act of 1933 also regulated the volatile banking industry and renewed the public’s confidence in the banking industry. The Banking Act of 1935 made the FDIC a permanent government agency.

So the next time you place money in one of your Bank5 Connect deposit accounts, take comfort in knowing that it has a total blanket of insurance coverage.

You can learn more about the FDIC at its website at www.FDIC.govAs a courtesy, you will be leaving Blog.Bank5Connect.com and going to another website. We have approved this site as a reliable partner, but you will no longer be under the security policy of Bank5Connect.com. Come back soon!

Additional details about the DIF are available at www.DIFxs.comAs a courtesy, you will be leaving Blog.Bank5Connect.com and going to another website. We have approved this site as a reliable partner, but you will no longer be under the security policy of Bank5Connect.com. Come back soon!

Ways to Cut Car Insurance Costs

If you’re in the market for auto insurance, doing your homework before picking a policy could save you enough money to fuel that new set of wheels for quite a few miles.

But choosing a policy that meets your exact needs can be tricky. How much coverage is adequate? What should the deductible be? Who’s a reliable provider?

And don’t forget all the different ways to enjoy discounts. A decent chunk of change can be saved by applying some or several of these cost-saving ideas:

  • Many providers offer discounts for those who set up automatic online bill pay. The same goes for opting to receive bills by e-mail instead of having paper bills mailed each month.
  • Insurance companies often offer deals when you obtain both car and homeowners insurance from them.
  • Getting insurance through a group plan – such as with a business, professional, or alumni group or association — can often lead to lower rates.
  • Compare premiums of different policy providers. Oftentimes a lesser known company may have rates that are lower than the more popular insurers.
  • Consider a higher deductible.
  • Check whether it’s cheaper to pay for a full year of coverage vs. paying monthly. Often administrative fees are tacked on to bills that are paid monthly.
  • Some providers offer discounts to students who achieve good grades in school, or for drivers over 50 who have a long track record of safe and responsible driving.
  • Maintain a good credit history. Many insurers will take this into account, especially since research shows that people with solid credit histories are likely to file fewer claims.
  • If you log low mileage, you may get a discount. Some providers will lower rates for those who drive less or who car pool.
  • Avoid paying for more coverage than you need. For instance, if you have towing services available through a car club such as AAA, opt out of this coverage in the policy.
  • It may pay to shelter your car. Some providers will offer a discount for vehicles that are kept in a garage.
  • Security and safety features could translate into savings. Theft deterrent systems and antilock brakes are just a few of the features that could lower insurance premiums.
  • Many providers will offer discounts to those who haven’t had any accidents or moving violations within a certain period, such as five years or more.

Once you have selected a policy, review it at least annually to ensure your coverage is in line with what you really need and is still reasonably priced.

Life Insurance – Who Needs It?

Family portrait
Purchasing life insurance has become a personal-finance decision more people are considering. That’s because fewer are receiving life insurance as an employer-paid benefit. Or, they can lose it during layoffs, which are the new normal in a volatile economy. Like all topics in personal finance, life insurance is a complex one. This blog will focus only on who really needs to purchase it. The issue is important because those who need it and don’t have it risk financial ruin. At present, according to LIMRA, only about 44 percent of households have an individual life insurance policy. On the other hand, those who don’t need it and are paying for it could be using the funds for other purposes, such as paying off college loans.

Essentially there are two types of life insurance. One is whole life, which can function as an investment vehicle. It tends to be relatively expensive. As its name “whole life” indicates, it extends for one’s entire life. However, because of its cost, in hard times, policy holders often wind up dropping it and not replacing it with the lower-cost and more flexible option – term insurance. That’s a serious mistake.

Cost of healthcareFor the cost of a latte or two a week, a healthy male can purchase life insurance for a “term” of 20 years with a payout of about $500,000. The good news here is that over the years, the cost of term life insurance has been going down. Term life can be a perfect fit for him since his financial obligations to his two children will end in 20 years. After that he may decide not to carry any life insurance, especially since the cost of even term goes up substantially with age.

This man is typical of those needing insurance. He has dependents. Without dependents and if his wife is employed, he might opt for no insurance. Most single people ignore – and rightly so – buying life insurance. However, this man with no children and a working wife may decide he needs life insurance as his aging parents become financially dependent on him. He may buy whole life instead since he cannot predict how long they will live and would prefer to also be building a nest egg for them.

Another kind of scenario is the affluent person or business owner whose funds will be tied up in probate upon death. They would likely purchase insurance policies as part of their estate planning. Those funds would be available immediately. They can pay the one-time cost of burial, debts, and the ongoing usual expenses. That carries the heirs and the business over until the estate is settled, which could take months or even years.

Some people who carry high credit card balances consider buying life insurance so that family members, none of them dependent, aren’t saddled with the debt. That’s unnecessary. Unless anyone has co-signed those accounts or the state is a community property one, the credit card balances are automatically eliminated upon death.

Decisions become more complex financially as a person ages or health problems develop and the dependent situation changes. The wife may lose her job after 20 years. She can’t get another one. Without the husband’s income, she couldn’t manage to make ends meet. A child becomes disabled. Because of all these possibilities, some opt for purchasing and making sacrifices to hold on to a whole life policy when they are young and healthy. This provides peace of mind, in the event of family reversals.

Of course, once the decision is made to purchase life insurance, then come all the other choices, such as how much coverage is enough, what distribution channel should be used to make the purchase, and what information is objective and trustworthy. However, what matters to prevent financial catastrophe is for those who need life insurance to not delay in getting it. Because, unlike auto insurance, this is a voluntary purchase, so there’s a tendency for people to drag their feet. That could lead to a financial disaster.

Photo credit: Shutter Daddy / Foter / CC BY-NC-ND

Flood Insurance: What Homeowners, Renters Still Need to Know

Hurricane Irene flood insurance

A picture of Hurricane Irene’s flood damage.

Thanks to so-called “storms of the century,” like Irene and Sandy, homeowners and renters currently know a lot more about flood insurance. For example, a Bankrate survey found that 81% understood that standard policies exclude flood coverage. That is a special kind of protection. Although it is only provided by the federal National Flood Insurance Program (NFIP), it is available through commercial insurance agents. That is mandatory for those with federally backed mortgages who are based in zones designated by the Federal Emergency Management Agency (FEMA) as a Special Flood Hazard Area (SFHA).

However, as with much of insurance, which is a complex topic, there remain huge information gaps. This can present a major challenge in managing personal finance. That is because FEMA documents that floods are the top national disaster and they occur in all states. While homeowners and renters may fear fire, there is a greater possibility that they will be victims of flooding.

The most common knowledge deficit is about how much coverage is provided and for what. Yet this is what must be factored in before purchasing property in a high-risk flood area. FEMA makes those designations. Those rankings are available at floodsmart.gov. Federal flood insurance is only available for up to $250,000 for damage to the building and $100,000 for contents. Private insurance can supplement that, but it is expensive. That means that buying a million-dollar home in such an area could mean financial ruin if there is a major flood. In addition, buyers might think twice about investing in sprucing up the basement. Insurance does not cover any renovations done below ground.

The story about content can be equally chilling. What is in the basement probably will not be covered. That ranges from the entertainment center to the equipment for the home office down there. As for the content in the rest of the owned property or rental, the news is not good either. The terms and conditions about reimbursements for content are based on “actual,” not “replacement” value of content. Given depreciation, the current fair value of a sofa may be $150. But it could cost $1,100 for a comparable piece of furniture.

A third sobering reality, which homeowners and renters might not know, is that flood policies do not pay for alternate living expenses. If the primary residence has been waterfront property in an expensive area like New York’s Hamptons, then shelling out for hotels and rentals will also be high. That means homeowners could be hit twice. Once would be through the loss of their property. The second hit would be through having to shell out ongoing lodging expenses.

A fourth not well-known fundamental about flood insurance is the likelihood that it will be needed. According to FEMA, 25% of flood claims are made by those in low- to moderate-risk areas. Here there is good news. Because of the reduced risk, there are preferred-risk policies with lower premiums. For homeowners they start at $129 for property and contents, and for renters for contents only at $49. Being on a high floor also does not protect from flooding. The flood can destroy pilings. The whole edifice could collapse. Therefore condo and co-op owners would be out the value of both their property and content.

Weather experts continue to disagree if there is global warming or the beginning of a mini-Ice Age. However, what is certain is that during the past several years there have been unusual weather events. Some of them caused flooding. The future cannot be predicted by the past. But, the risk of a flood seems higher for all parts of the nation than it had previously. It seems especially high for areas near the water and low-lying regions.

Photo credit: DVIDSHUB / Foter / CC BY

Renter’s Insurance: Coverage of Diverse Risks

All insurance, including renter’s, is a hedge against risk. The problem with renter’s insurance is that not many understand the risks it can cover. That might be the reason, according to the Insurance Information Institute (III) survey conducted by ORC International, only 31% of renters have it. Because it is not mandated by law or lenders, as with cars and homes, many never take the time to investigate this financial matter.

The reality is that renter’s insurance covers a broad spectrum of risk. The most basic is the cost of replacing personal property lost through fire, broken pipes, lightning, vandalism, car crashing into the premise, electrical surge, civil unrest, or volcano. Not until renters take an inventory of their belongings do they realize replacing them may total about $20,000. If the rental is of a house, not an apartment, that could be far more.

However, also to be factored in is the cost of alternate lodging if the premise is not habitable. That could put the average middle-class person in a financial hole. If the destruction has been caused not by water damage such as from a broken pipe but from a flood, then the renter is not protected by the standard policy. Hurricane Sandy victims found that out too late. Lesson learned: Read the policy. Separate flood insurance has be purchased. Although provided by the federal government, it is available through insurance companies.

A third kind of risk is legal liability, the kind that could trigger bankruptcy. That could result from an injury which occurs on the premises. According to the National Safety Council, one in 17 Americans had an injury indoors that required medical care. Victims could sue not only for reimbursement for medical care, ongoing therapy, and permanent disability, they could also claim there was negligence in how the renter maintained the premise.

Given the financial implications of the risks, the cost of renter’s insurance is relatively small. In a non-urban area that does not have a high crime rate, according to III, that could be about $200 annually. By bundling that with auto and other kinds of insurance, the price could be lower. Also, there are discounts for having security measures such as burglar alarms, deadbolt locks, and smoke detectors, as well as for those over 55 and the retired.

The hard work is the decision-making about the terms and conditions of the policy. Research can be done on the web under the keywords “renter’s insurance.” Essentially the main decisions deal with:

Overall amount

Reciept insurance: breakPolicies are written for a fixed amount, not for coverage of certain individual items. To make this decision it makes sense to take a detailed inventory of the value of property, taking into consideration what the cost of replacing it would be. The desk which cost $20 at a flea market 20 years ago, now considered an antique, might have a replacement cost of $5,0000. To ensure proper payment, it is common sense to save receipts, get appraisals, and do a video recording of the content of the premises.

Actual versus replacement value

Some insurers write policies based on the value of the item when the loss occurred. That is known as Actual Cash Value. The laptop purchased for $700 may be worth only $100 four years later. The other option is Replacement Value. That same laptop might cost $545 today.

Deductible

As with all insurance, the higher the deductible, the lower the premium. This makes especially good sense with renter’s insurance since a claim is not usually filed for petty losses. That is because filing claims or multiple ones within a certain time period frequently flags the buyer as a poor risk. In the near future, it could be impossible to get any kind of renter’s insurance.

Dogs

Insurance break: dogSome insurance companies will not write policies covering certain breeds of dogs. Research on this is as simple as contacting a few and finding out their contract stipulations. If pit bulls are not covered, then the renter has to decide whether to go without insurance or to negotiate a special contract.

Special items

Property of high value, ranging from collectibles to diamond rings, requires riders to standard policies. The cost is high. There are alternate risk reducers, such as maintaining the items in containers which are fire- and waterproof, and kept where thieves are unlikely to search.

Rational people can have very different attitudes toward risk, points out Ken Binmore in his book Game Theory: A Very Short Introduction. If one agrees with that, there are no right or wrong answers about purchasing renter’s insurance, how much, and with what terms and conditions. However, if disaster strikes, the victims without renter’s insurance might conclude they operated on a bad set of assumptions.

Photo credit: spike55151 / Foter / CC BY-NC-SA