Q: Whenever I make deposits at my bank, I’ve noticed that they are FDIC insured. What does this mean?

A: When a bank says your deposits are insured through FDIC, this means that the Federal Deposit Insurance Corporation literally provides an insurance policy for your deposit. The amount that is insured is usually at least $250,000.

The FDIC was created in 1933 when the Great Depression, which occurred during the 1920s and 1930s, saw the failure of many banks. Before the FDIC came into being, any time a bank failed, any deposits that were in it at the time of the failure were lost. The depositor had lost any funds that may have been in the bank at the time of the failure, and there was no way for these losses to be recouped. The FDIC changed all that.

In response to the recent bank crises, the FDIC raised its insurance amount from $100,000 to $250,000. This brought many depositors peace of mind, because they knew that, unlike those unfortunate customers in the Great Depression, they did have a resource for getting their deposits back.

If you are using a bank that does not provide FDIC insurance, you might want to consider switching to one that does.