A few issues ago, I wrote about a quartet of failed banks and annuity carriers where, when all was said and done, every one of the annuity and bank customers was fully covered and didn’t lose a penny, regardless of account balances. Let’s take a closer look at the safety net behind bank accounts and fixed annuities.
Since the founding of FDIC insurance in January 1934, no depositor has lost a dime of insured funds as a result of a bank failure.
State Guaranty Funds were set up by the individual states to protect policyowners in the event of an insurer failure. In 1983, the state guaranty associations founded the National Organization of Life and Health Insurance Guaranty Associations.
So what are the limits of this coverage? FDIC covers up to $100,000 in deposits for one owner at one insured bank of nonqualified funds, and up to $250,000 in bank IRAs, and there are different categories of owners that may allow one to increase coverage.
All states (plus Puerto Rico) provide $100,000 in withdrawal and cash values for all fixed annuities through their guarantee funds. Seven states (and one district) have higher limits of up to $300,000.
The Deposit Insurance Fund assesses banks based on their risk; the riskier the bank, the higher the assessment. Assessments range from 0 percent to 0.27 percent.