The maximum insurance limit has been at the $100K level since 1978, when it was raised from $40,000. Between 1980 and 1994, nearly 3,000 banks and thrifts in the United States went belly-up—yet no one lost a dime on any account of $100,000 or less at one institution. By contrast, only four outfits went under last year, and thus far this year there have been only five.

Recently, House and Senate panels have brought out bills to expand and reform deposit insurance coverage, which could lead to higher premiums that banks must put into the insurance funds. Plus, the new laws, which insiders predict will be passed within a year, would merge the Bank Insurance Fund and the Savings Association Insurance Fund. They also would index future coverage limits to inflation. The bottom line? Even greater protection for your deposits such as savings, checking, money market accounts and CD’s, and your retirement money.

In the past 20 years, the average Joe has become more knowledgeable about how his money is protected—beyond just being aware that an FDIC label on his bank’s door means safety. But most consumers still aren’t 100 percent savvy about what’s covered and what isn’t. For example:

• Presently, the $100K limit covers up to that amount in principal and interest, in one person’s name at the same bank or savings institution. IRAs and Keogh funds are added together and insured separately, also up to $100K. If, say, you deposit 100 grand in a 5 percent CD in one bank, the $5,000 you earn in interest is not covered. You’re better off depositing only $95,000 so the interest is also protected.

• Yet, through a complicated combination of individual, joint and testamentary revocable trusts, it’s possible for a family of four to insure as much as $1.4 million at the same bank. To learn how, visit www.fdic.gov for details.

• When two or more banks merge, their deposits continue to be separately insured for six months from the date of the merger. CDs assumed by another institution continue to be separately insured until the earliest maturity date after the end of the six-month period.

• Nondeposit investment products such as securities and mutual funds peddled by third-party brokers/dealers or insurance companies sitting in bank lobbies are not covered. Be sure you know the difference and learn the risks. Unlike FDIC-insured accounts, you could lose both principal and interest.

Where does Uncle Sam get the money to insure your deposits? From the premiums the banks pay into the insurance funds. Under the current system, the funds must have a legal minimum ratio of 1.25 percent of total U.S. bank deposits or $1.25 for every $100 they guarantee. At the moment, Congress is afraid that the funds may dip below that 1.25 figure and they don’t like it because of the way things are structured. Ninety percent of banks do not pay into the system at all. The new laws aim to change all that with a more flexible, fairer plan and even give the banks rebates during good economic times.
Once again, be sure to check FDIC’s great Web site mentioned above. It’s loaded with answers to every conceivable question you could ask, plus explanations of different types of insured and uninsured accounts, where to call if you have a special question, and whom to call if you have a complaint.

The best news is that a year from today, you’ll probably enjoy more federal insurance protection for your hard-earned cash than you are doing right now.