How does the FDIC insure certificates of deposit?

In India, the Deposit Insurance and Credit Guarantee Corporation (DICGC) is responsible for insuring deposits, including certificates of deposit (CDs), offered by banks. Here's how the DICGC insures CDs:

1. Coverage Limit: The DICGC provides insurance coverage up to a maximum limit of Rs. 5 lakhs per depositor per bank. This means that if you have multiple CDs or deposit accounts with the same bank, the total amount insured is up to Rs. 5 lakhs across all accounts held with that bank.

2. Types of Deposits Covered: The DICGC covers various types of deposits, including savings accounts, current accounts, fixed deposits, and certificates of deposit. This coverage extends to both principal and interest amounts.

3. Coverage Period: The insurance coverage is available for a period of five years from the date of the bank's default or from the date the DICGC is informed of the default, whichever is earlier.

4. Multiple Accounts: If you have accounts with different banks, each bank is considered a separate entity, and the Rs. 5 lakhs insurance coverage limit applies individually to each bank. This means that if you have CDs with multiple banks, each bank's CDs are insured up to Rs. 5 lakhs separately.

5. Joint Accounts: In the case of joint accounts, the insurance coverage is divided equally among all joint account holders, with a maximum limit of Rs. 5 lakhs per depositor per bank.

6. Nominee Accounts: If you have designated a nominee for your CD, the insurance coverage is provided to the nominee in the event of your demise.

It's important to note that the DICGC insurance coverage is meant to protect depositors in the event of a bank's default or failure. It does not cover losses incurred due to changes in market conditions, investment decisions, or early withdrawal penalties associated with CDs. Additionally, the DICGC insurance coverage limit is subject to change, so it's advisable to stay informed about any updates or revisions to the coverage limit.

Before opening a CD with a bank, it's a good practice to verify that the bank is a member of the DICGC and to understand the terms and conditions of the insurance coverage. This can provide peace of mind and assurance that your deposits, including CDs, are protected up to the specified limit.