Did you see the newscast showing lines of people waiting to withdraw their money from the Pasadena-based IndyMac Bank.
The Federal Deposit Insurance Corporation which is fully backed by the United States Government covers deposits of up to $100,000 per person per bank. If a bank were to fail, the depositor could get a check immediately from FDIC for up to the insured amount. The dilemma is when you have more than the $100,000 in that bank.
FDIC has some little known rules that actually increase the amount of coverage based on the legal ownership of the accounts. The five types are individual, joint, business, retirement plan or a trust of some kind.
Many types of qualified retirement funds like an IRA or a SEP increase the limit to $250,000 per person.
Here is an example of increased coverage. Bob & Carol have a joint CD of $200,000; each has $100,000 coverage. They each have $250,000 in separate qualified retirement accounts which is covered. Bob & Carol have an incorporated business with an account that has $100,000 coverage. They have a qualified trust, payable on death, for their grandchild of $100,000 which is covered.
This example is purely illustrating what types of things may be possible and obviously, individual investigation needs to done to determine your exposure. Talk to your tax professional or banker to see how to increase your coverage.
Of course, one simple solution would be to spread the money around to different banks and stay underneath the $100,000 limit.
FDIC has a publication that explains the details of Your Insured Deposits. It will give you specifics on how to increase the coverage through one bank. FDIC also offers a calculator that will help you determine the limits of your coverage at a particular bank based on the way you have your accounts styled.