What is FDIC insurance, and what does it not cover?
It protects you from your bank failing. It does not protect you from most of the things people think it protects them from.
Below the line, the government stands behind your balance. Above it, you are a creditor of the bank.
What it actually is
It is not a customer service guarantee and it is not fraud protection. It covers exactly one event: the bank itself fails.
The 250,000 limit is more generous than people assume, because it is per ownership category. An individual account and a joint account at the same bank are separate categories, so a couple can be covered well beyond 250,000 in one institution without doing anything clever.
What it does not cover, which is the useful half
Investments. Stocks, bonds, mutual funds, crypto. Even bought through your bank, even sitting in the same app. Losing money in a fund is not a bank failure.
Fraud on your account. That is a different set of protections entirely, with different rules and different deadlines.
A fintech that is not a bank. This is the important one, and it is now the most common source of confusion in America.
The pass-through problem
Most neobanks and money apps are not banks. They hold your balance at a partner bank, and FDIC insurance passes through to you only if the records are accurate enough for the FDIC to identify your share.
That distinction is invisible in the interface and decisive when something goes wrong. If the middle company's ledger is a mess, the insurance is theoretical until somebody untangles it, which can take months.
The phrase to look for is "deposits are held at [named bank], Member FDIC." If an app cannot name the bank, that is the answer.
2023 sharpened all of this. Several bank failures reminded a generation that the limit is real and that uninsured deposits are genuinely at risk. Anyone holding business balances above the limit at a single institution learned it the hard way.
An insurance policy on the building. It pays out if the building burns down. It does not pay out because you disliked the tenant, or because the painting you kept inside turned out to be a fake.
Where you meet it
Every "Member FDIC" line in small type, every neobank whose deposits sit at a bank you have never heard of, and every business account holding more than 250,000 in one place.