The Federal Deposit Insurance Corporation, or FDIC, is the agency that backs your deposits at member banks. The FDIC insures deposit accounts up to $250,000. But with bank failures peaking during 2009, potential customers may still be nervous. How can you maximize your FDIC insurance coverage and make sure that your deposit is safe?

The FDIC is quite fond of reminding the public that no depositor has ever lost even one penny of FDIC-insured money. This includes potential losses from bank failures; when a bank is deemed insolvent, the FDIC swoops in, takes over for a while, and often brokers a sale of assets to a stronger financial institution. Having the FDIC in your corner makes good sense, no matter how much you have on deposit. There are three basic things you can do to protect yourself and your money

• Know your bank
• Know your rights
• Understand account ownership

To know your bank, you need to recognize whether it is a member of the FDIC. Banks usually display their FDIC associations prominently, but if you aren’t sure, ask your banker. You can also visit the FDIC’s own member list here. And even if your bank is an FDIC participant, that doesn’t mean every type of account you open is insured. For instance, annuities, mutual funds, and treasuries don’t count for FDIC purposes–this means those accounts can lose money or be wiped out entirely, without recourse from the customer. The FDIC also reminds people that a safe deposit box and its contents aren’t covered either, regardless of whether or not it is located in an FDIC-member bank.

If your bank (and the accounts you own) contain FDIC protections, what does that mean to you? The FDIC has a “Depositor Bill of Rights” that defends your funds from many ills in the case of a bank failure. For example, FDIC coverage is available as soon as you open your account at a member bank. Also, if your financial institution becomes insolvent, “prompt access” to funds is still guaranteed. The FDIC currently insures deposits up to $250,000, and banks are required to inform customers what accounts are or are not insured.

Depositors may know if their bank is insured, and they may be well aware of most of their rights regarding their money. What so often gets lost in the shuffle is the importance of understanding account ownership. When I was opening CDs and savings accounts for folks, most didn’t understand that the FDIC only insures deposits per ownership, per bank. This means that although there is no limit on how many different banks you can be insured with, account ownership at individual banks determines coverage limits. In other words, you can’t just open a bunch of different $250,000 CDs and expect that they are automatically insured.

Instead, accounts at one bank must have different ownership designations to be fully insured. Let’s say that my wife Megan and I have $1,000,000 total in the bank. (We can all dream, can’t we? Humor me…) If I simply opened four $250,000 CDs under my own name, then I would have $750,000 that was uninsured by the FDIC–not a good plan. Yet I could open one CD under my name, Megan could open one under hers, we could open one as a joint account, and one as a “revocable trust,” meaning it was in my name but payable upon my death to my wife. In this case, all four accounts are fully insured, because each account has a separate ownership designation. See the FDIC coverage page or ask your banker to make sure all your deposits are insured when opening new accounts.