# Federal Deposit Insurance Corp. (FDIC): Definition & Limits

By [nmjub](https://paragraph.com/@nmjub) · 2023-05-13

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What Is the Federal Deposit Insurance Corp. (FDIC)?
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The Federal Deposit Insurance Corp. (FDIC) is an independent federal agency insuring deposits in U.S. banks and thrifts in the event of bank failures. The [FDIC was created](https://www.investopedia.com/articles/economics/09/fdic-history.asp) in 1933 to maintain public confidence and encourage stability in the financial system through the promotion of sound banking practices.1

As of 2023, the FDIC insures deposits up to $250,000 per depositor as long as the institution is a member firm. It is [critical for consumers to confirm](https://www.investopedia.com/articles/pf/06/fdicinsurance.asp) whether their institution is FDIC-insured.2 The primary purpose of the FDIC is to prevent "run-on-the-bank" scenarios, which devastated many banks during the [Great Depression](https://www.investopedia.com/terms/g/great_depression.asp). For example, with the threat of the closure of a bank, small groups of worried customers rushed to withdraw their money in those years.

After fears spread, a stampede of customers, seeking to do the same, ultimately resulted in banks being unable to support withdrawal requests. Those who were first to withdraw their money from a troubled bank would benefit, whereas those who waited risked losing their savings overnight. Before the FDIC, there was no guarantee for the safety of [deposits](https://www.investopedia.com/terms/d/deposit-slip.asp) beyond the confidence in the bank's stability. Understanding the FDIC

Because practically all banks and thrifts now offer FDIC coverage, many consumers face less uncertainty regarding their deposits. As a result, banks have a better opportunity to address problems under controlled circumstances without triggering a run on the bank.

In case of [bank failure](https://www.investopedia.com/terms/b/bank-failure.asp), the FDIC covers deposits up to $250,000, per FDIC-insured bank, for each account ownership category such as [retirement accounts](https://www.investopedia.com/retirement/taxsavvy-investment-strategies-retirement-accounts/) and trusts. This sum is adequate for the majority of depositors, though depositors with more than that sum should spread their assets among multiple banks.

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*Originally published on [nmjub](https://paragraph.com/@nmjub/federal-deposit-insurance-corp-fdic-definition-limits)*