What is the FDIC? How does it protect your finances?
What is FDIC insurance?
FDIC insurance is protection from the Federal Deposit Insurance Corporation (FDIC), an independent U.S. government agency, that covers deposits at member banks. If an FDIC-insured bank fails, you’re generally covered up to $250,000 per depositor, per bank, per ownership category. It covers the money you deposit at a bank — not your investments.
That $250,000 is not a single overall cap — because it applies per depositor, per bank, and per ownership category, total coverage can add up to more (see the FDIC’s deposit insurance coverage resources, and the FAQ below on how to insure more than $250,000).
What is the FDIC?
The FDIC stands for the Federal Deposit Insurance Corporation. It’s an independent government agency that insures consumers’ funds up to $250,000 per depositor, per insured bank, per ownership category, if that bank fails. It was started after the passage of the Banking Act of 1933 in order to protect the financial system and consumers after the stock market crash that occurred in 1929. The resulting bank runs were a key factor in the Great Depression as banks around the country began to fail en masse.
Deposits in FDIC-insured banks and thrift institutions (which includes mutual banks, savings and loan associations) are automatically insured up to $250,000.
Credit unions and brokerage accounts are insured by other organizations: the National Credit Union Administration (NCUA) and the Securities Investor Protection Corporation (SIPC), respectively.
How does the Federal Deposit Insurance Corporation work?
FDIC-insured banks pay premiums into a fund that is managed by the FDIC. This requirement, along with earned interest from U.S. government investments, generates a large pool of money from the insured banks together with the fund’s earnings that can be used to cover the losses in the event of a bank failure. If a bank failure is large enough to exhaust the fund, the FDIC deposit insurance is backed by the full faith and credit of the US Government.
When banks fail, the FDIC coordinates the search for and identification of other banks to step in and acquire the failed banks’ deposits and loans. The FDIC will search for a buyer of the failed institution to take over the borrower’s funds and assets. The customers of the failed bank are then transferred to the new financial institution and can continue with their banking activities.
How the FDIC covers failed banks
In the case of a bank failure, the FDIC has been able to recover every dollar of insured funds since it was founded in 1933. This means that, historically, consumer funds have been protected up to the $250,000 insurance limit when they deposit it with an FDIC-insured bank.
What types of accounts are insured by the FDIC?
The FDIC insures deposits up to the limit for several different types of accounts held at insured financial institutions, including:
- Deposit accounts such as checking, savings and money market accounts
- Time deposits like certificates of deposit (CDs)
- Bank-backed checks like cashier’s checks, money orders, and certified checks
- Negotiable order of withdrawal (NOW) accounts
The FDIC covers $250,000 per person, per ownership category, per bank. So if a couple has a joint account, both spouses are protected up to $250,000 each for that account, for a combined total of $500,000. And if either spouse has their own individual account, they’re protected up to $250,000 on that account, too.
What is not covered?
There are several things that the FDIC doesn’t cover, including:
- Stocks and mutual funds
- Bonds
- Cryptocurrency
- Life insurance policies and annuities
- Municipal securities
- Safe deposit boxes or the items within them
FDIC vs. SIPC
FDIC insurance and SIPC protection are often confused, but they cover different things — and neither protects against market losses:
- FDIC insurance covers bank deposits — checking, savings, money market accounts, and CDs — at member banks, up to $250,000 per depositor, per bank, per ownership category.
- SIPC protection covers securities (such as stocks and bonds) held at a member brokerage if that brokerage fails. It does not protect against investment losses — if your investments fall in value, SIPC does not cover the difference.
In short: FDIC is for the money you deposit at a bank; SIPC is for the securities you hold at a brokerage; and losing money because the market dropped is covered by neither. For the securities side, see M1’s guide to SIPC and brokerage protection.
Investing involves risk, including the possible loss of principal. FDIC insurance applies to deposits at member banks; it does not apply to securities or other investments, which are not FDIC-insured, are not bank-guaranteed, and may lose value.
Is M1 FDIC insured?
Yes, cash in an M1 High-Yield Cash Account is eligible for FDIC insurance once it’s swept to M1’s partner banks and out of the brokerage account. Until the cash is swept, it’s held in a brokerage account and protected by SIPC rather than the FDIC. Spreading cash across a network of partner banks lets coverage extend beyond the standard $250,000-per-bank limit — and because coverage is counted per bank, it’s worth keeping track of any money you already hold at those same banks, since it counts toward the same limit. A complete list of participating program banks is available here.
M1’s High-Yield Savings Account is furnished by B2 Bank, N.A., Member FDIC. M1 is not a bank. On its own, a single FDIC-member bank insures up to $250,000 per depositor, but B2’s Insured Deposit Network Program extends coverage further by spreading deposits across other FDIC-insured banks. You can see the participating banks here.
Stocks and ETFs in an M1 Invest account aren’t FDIC-insured — no investment is — but they’re protected by the Securities Investor Protection Corporation (SIPC) up to $500,000, which includes up to $250,000 in cash.
Brokerage products and services are not FDIC insured, no bank guarantee, doesn not protect against market loss, and may lose value. Brokerage products and services are offered by M1 Finance LLC, Member FINRA / SIPC.
Frequently asked questions about FDIC insurance
FDIC insurance covers deposits at member banks — checking, savings, money market accounts, and CDs — generally up to $250,000 per depositor, per bank, per ownership category. It does not cover investments.
No. Stocks, bonds, mutual funds, cryptocurrency, and annuities are not FDIC-insured, even when bought through a bank — they carry investment risk, including possible loss of principal.
FDIC insurance protects bank deposits; SIPC protects securities held at a member brokerage if the brokerage fails. Neither protects against a decline in the market value of your investments.
Yes — a money market account at an FDIC-member bank is generally FDIC-insured up to the limits, unlike a money market fund, which is an investment and is not.
You can extend FDIC coverage beyond $250,000 by holding deposits in different ownership categories (for example, individual and joint accounts, which are insured separately) or by spreading deposits across more than one FDIC-member bank. Some cash accounts also sweep deposits across multiple partner banks to extend coverage. Coverage rules and conditions apply; confirm your specific situation.
If an FDIC-insured bank fails, the FDIC generally reimburses insured deposits up to the coverage limit — historically, often within a few business days. Amounts above the limit may not be fully covered.
Updated July 22, 2026.
Brokerage products and services are not FDIC insured, no bank guarantee, and may lose value. Brokerage products and services are offered by M1 Finance LLC, Member FINRA / SIPC.
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