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What happens to my money if the bank fails?Only bank failures are coveredFDIC insurance applies only if your bank fails. ... When a bank fails, the FDIC must collect and sell the assets of the failed bank and settle its debts. If your bank goes bust, the FDIC will typically reimburse your insured deposits the next business day, says Williams-Young. Jul 16, 2015If your bank or credit union fails and your funds are insured, your money is safe. The federal government, with backing from the US Treasury, can replace any money that was lost by the bank.Here's what happens when your bank failsMarcie Geffner,Bankrate.comJul 16, 2015, 1:32 PM[Did you know that the amount of money in your bank account matters in the unlikely event your bank fails?While your deposits are insured for up to $250,000 by the Federal Deposit Insurance Corp. or FDIC, that doesn't mean every account at a particular bank is covered for that amount. The way you structure your accounts could put you at risk. But there also are ways to set up accounts so you're insured for far more than $250,000."A lot of consumers don't understand what the limits are," says Thomas Healy, deputy chief compliance officer at Ally Bank. "People think it's $250,000. Period."What is FDIC insurance?Since it was established in 1933, the FDIC has provided insurance on your money in case your bank goes belly up.The insurance covers checking, savings and money market accounts, and certificates of deposit, or CDs. It also covers other types of accounts, such as individual retirement accounts, or IRAs, and trust accounts.All state and nationally chartered banks must carry the insurance, says FDIC spokeswoman LaJuan Williams-Young.FDIC insurance doesn't cover investment products, such as mutual funds, annuities, life insurance policies, stocks, bonds or the contents of your safe-deposit box.If your money is on deposit at a federally chartered credit union or the vast majority of state-chartered ones, you have coverage through the National Credit Union Administration, or NCUA, which operates similarly to the FDIC.FDIC insurance coverage limitsYes, you have coverage up to $250,000, but that doesn't mean every account you have is insured for that much. Instead, coverage is based on how the accounts are owned.Single accountsThe maximum amount of coverage for single accounts at one bank is $250,000. All single accounts at the same bank are added together. Let's look at the example of an account holder we'll call Mark.Joint accountsEach co-owner receives $250,000 in insurance for each account, plus $250,000 in insurance for individual accounts at a bank. Let's look at an example of married account holders we'll call Ron and Pat.You can boost your coverage limits higher by opening other types of accounts within the same bank. Other ownership categories include:Irrevocable trusts.Employee benefit plan accounts.Corporation, partnership and unincorporated association accounts.Government accounts."It's very easy as an individual to have $1 million (insured) -- if not more, in some cases -- at specific institutions," Healy says.Consumers need to keep in mind that their accounts are still subject to FDIC limits even if they have accounts at different branches of the same bank, Healy says. But if they have accounts at two different banks, the insurance limits apply at each bank individually. They aren't lumped together.More on insurance coverageThe FDIC offers multiple ways for depositors to find out how to set up their accounts to maximize their protection:A toll-free consumer hotline, 1 (877) ASK-FDIC or 1 (877) 275-3342, allows depositors to talk to a live person at no cost.An online customer assistance form allows depositors to ask questions or submit complaints by email.An automated interactive online service, the Electronic Deposit Insurance Estimator, also known as "EDIE," helps depositors analyze whether accounts are properly set up.Depositors can ask questions or submit complaints by mail to FDIC, Attn: Deposit Insurance Outreach, 550 17th St. NW, Washington, D.C., 20429-9990.Only bank failures are coveredFDIC insurance applies only if your bank fails. And after a few volatile years, bank failures have again become rare. Just a handful of banks have been shuttered in 2015.That's a huge improvement. From 2008 to 2012, the FDIC reported 465 bank failures. The largest was Washington Mutual, which had $307 billion in assets when it failed in 2008. The government blamed the failure of WaMu's high-risk lending strategy.When a bank fails, the FDIC must collect and sell the assets of the failed bank and settle its debts. If your bank goes bust, the FDIC will typically reimburse your insured deposits the next business day, says Williams-Young.Banks cover you in case of fraudIt's a different story if your bank account is hacked or someone writes a bogus check and drains your account."It's only for bank failure that FDIC insurance covers the account," Williams-Young says.Instead, it's the banks themselves that are covering your losses if someone steals your money, says Doug Johnson, senior vice president of payments and cybersecurity policy for the American Bankers Association, or ABA. "Banks as a matter of policy fully reimburse customers for fraud on their accounts."Banks can purchase insurance to protect against losses from fraud, and also have reserves to cover such losses, Johnson says.A study by the ABA found that in 2012, fraud against deposit accounts cost banks $1.74 billion, but banks prevented $13 billion in fraud, Johnson says.If you suffer a loss due to fraud, you should report it to your bank as soon as possible so it can be investigated. "We're getting pretty good at doing the investigations," he says.By law, banks have to give customers provisional credit within 10 days. "They generally give provisional credit much sooner, or full credit," Johnson says.]What Happens to Your Money in a Bank Failure?BY JUSTIN PRITCHARDUpdated December 05, 2018[Banks are the safest place to keep your cash. Nevertheless, bank failures happen from time to time. Here's a look at what causes bank failures and what you can do about them. The main thing to know in a bank failure is that your money is probably safe. If your money is FDIC insured, you probably don’t need to panic.What Causes Bank FailuresBanks go under when they are no longer able to meet their obligations. The bank might lose too much on investments, or the bank may be unable to provide cash when depositors demand it (see below).Ultimately failures happen because banks don't just keep your money in vaults. When you walk in and deposit cash (or deposit funds electronically), the bank invests that money. A simple form of investment is making loans to other bank customers so they can earn interest — and pay you interest on your deposits.Banks also invest in much more complicated ways. If the bank takes large losses in any one area, it risks failing.What Happens in a Bank Failure?Most US banks are FDIC insured. If you are not banking at an FDIC insured institution, you're taking a huge risk. When these banks fail, the FDIC takes over. They may sell the bank to another (stronger) bank, or they may operate the bank for some time as a federally owned bank.The FDIC insures deposits up to $250,000, so keeping more than that at any bank may put your money at risk. However, it is possible to have more than $250,000 insured at one bank if several people or entities have an interest in the money. For example, retirement accounts and savings accounts for different family members can increase your protection. Take the time to understand FDIC limits if you have more than $2500,000 at the bank.Customer ExperienceFor many customers, a bank failure is a non-event. Customers continue to use the checks, debit cards, and electronic transfer instructions that they used before the bank failure. At some point, customers may eventually get new checks and cards.​TimeframesThe FDIC does not publish a specific timeframe for resolving bank failures. They note that historically they have made funds available within one business day. They try to close banks down on Fridays and get back to "business as usual" by Monday morning.However, circumstances with a given bank failure or with your accounts can slow the process down. The FDIC's first choice is to create a new bank for seamless operations until your account is sold to another bank. In some cases, this option is not available and they cut you a check for your insured deposits.Bank Runs and Bank FailuresAfter a bank failure is announced, there is little reason to make a run on the bank if your assets are insured. If the FDIC has already taken over, your money is no longer held by the weak and failing bank. If you want to get your money out and use a different bank, you can write a check or transfer your money electronically to the new bank.If the FDIC has not found a successor bank, you will not have access to your money and you'll have to wait for a check from the FDIC. In either case, there's nothing you can do after a bank failure is announced to affect how much money — if any — you'll lose.Uninsured DepositsIf you have uninsured deposits at an FDIC insured institution, you may have a problem. The FDIC typically makes insured deposits available immediately after a bank failure. Uninsured deposits may not be available for years. The FDIC has to sell the institution and its assets and see how much money (if any) is left to distribute to creditors.Destroyed BanksSometimes bank branches are destroyed as a result of natural disasters or terrorism. Physical destruction is different from bank failure. Again, if your accounts are insured the event is most likely just an inconvenience — not something that will completely ruin you.​Avoiding Bank FailuresIt is difficult to know which banks will fail. The FDIC does not announce bank takeovers ahead of time. The best course of action is to make sure that you’re observing FDIC limits and not taking any risks.Some bank rating services may help you avoid bank failures. These services look at banks’ strength, business models, and exposure to various risks. You can also gain some insight by calculating your bank's Texas Ratio. However, bank failures can be difficult to predict, especially by outsiders, so it's wise to keep your funds insured.]