Deposit Insurance Explained: FDIC, FSCS and EU Schemes

Deposit insurance is why most people never wonder whether their bank might fail. If a licensed bank collapses, a national scheme repays depositors up to a limit, usually within days or weeks. The protection is strong but has edges: it applies per person, per banking licence and sometimes per account type, and covers deposits, not everything that looks like one.

How deposit guarantee schemes work

A deposit guarantee scheme is a fund, backed by the banking industry and ultimately by the state, that repays eligible deposits when a bank fails. Banks pay levies into it. If a bank is wound down, the scheme either pays depositors directly or transfers their accounts to a healthy bank.

The point is not only to compensate people after a failure. It is to prevent bank runs. Savers who know their money is safe have no reason to rush for the exit at the first rumour.

The main schemes: US, UK and EU

• United States — FDIC. The Federal Deposit Insurance Corporation insures deposits at member banks up to $250,000 per depositor, per insured bank, per ownership category. Categories include single accounts, joint accounts, certain retirement accounts and trust accounts, each with its own limit. Credit unions are covered separately by the NCUA on similar terms.
• United Kingdom — FSCS. The Financial Services Compensation Scheme protects eligible deposits per person, per authorised institution. The limit was raised to £120,000 from December 2025. Joint accounts are treated as belonging equally to each holder, so each person's share counts towards their own limit.
• European Union — national DGSs. EU law requires every member state to run a scheme covering at least €100,000 per depositor, per bank. Each country operates its own scheme, and a bank's branches in another EU country are usually covered by the home country's scheme.

Limits are reviewed from time to time: treat these figures as correct at the time of writing and confirm them on the scheme's official website.

Several schemes also offer temporary high balance protection: for a limited period, larger sums from specific life events, such as a house sale, an inheritance or an insurance payout, are covered above the normal limit. Conditions vary and usually require evidence.

What is and is not covered

Covered, generally:

1. Current, checking and savings accounts at a licensed bank, building society or credit union.
2. Fixed-term deposits and certificates of deposit.
3. Cash held in some account types such as cash ISAs in the UK or certain retirement accounts in the US.

Not covered as deposits:

• Investments — shares, bonds, funds and crypto assets, even when bought through a bank. Some markets have separate investor compensation schemes for broker failure, but none protects against falling prices.
• E-money balances at payment apps that are not banks. These are protected by safeguarding rules rather than deposit insurance, a distinction explained in our comparison of online and traditional banks.
• Safe deposit box contents.

The shared-licence trap

The limit applies per licence, not per brand. Banking groups often run several brands under a single licence; in that case, money split across them is still added together. Some fintech apps also place customer money with one or more partner banks, so that your balance is protected by the partner bank's licence, often together with anything you hold there directly.

A worked example with illustrative figures. Anna, in the UK, holds £70,000 in a savings account at Brand A and £60,000 in a fixed-term deposit at Brand B. If both brands operate under separate licences, each balance is within the limit and the full £130,000 is protected. If they share one licence, the total of £130,000 exceeds the £120,000 limit, and £10,000 is unprotected. Same money, different outcome, decided by the small print.

A US equivalent: a married couple with $200,000 each in individual accounts and $400,000 in a joint account at one bank can, in principle, be fully covered, because each individual account and each person's share of the joint account fall under separate ownership categories. The rules are precise, so the FDIC's online estimator is the place to check a real arrangement.

How to check a bank is covered

1. Find the legal entity. The website footer or terms and conditions should name the licensed institution, its registration number and its regulator.
2. Search the regulator's register. In the UK, the Financial Services Register shows whether a firm is authorised to accept deposits. In the US, the FDIC's BankFind tool lists insured banks. In the EU, the national central bank or supervisor publishes a list.
3. Check for shared licences. UK schemes publish lists of brands that share an authorisation; banks must disclose it too.
4. Read the deposit protection information sheet. EU and UK banks must provide one, naming the scheme and the limit.
5. For apps, ask where the money sits. If the answer is "with our partner bank", find out which one and whether coverage is passed through to you.

Practical guidance

For most people, deposit insurance is invisible, which is how it is meant to work. It matters when balances grow: after a property sale, a lump sum, or a substantial emergency fund alongside other savings.

Know your total per licence, not per account. Spread larger sums across separately licensed institutions, keep a note of which brands share a licence, and remember that the protection covers cash, not investments. If you are holding a significant sum temporarily, a qualified, regulated adviser can help you think through how to hold it. Chasing a higher rate, as discussed in high-yield savings accounts, is only worthwhile once protection is confirmed.