Last summer, a law was enacted that raised the standard maximum deposit insurance amount (SMDIA) to $250,000. The law made permanent a previous temporary increase to $250,000 from the former maximum limit of $100,000. The new permanent maximum limit should especially benefit consumers who figure to have more than $100,000–such as in multi-year certificates of deposit–in their bank beginning in 2014, when the temporary hike in the maximum limit had been scheduled to expire.

It is important to bear in mind that the SMDIA does not mean that under no circumstances may a single individual have insurance on more than $250,000 in a single institution. The SMDIA applies per depositor, per insured depository institution, for each account ownership category. A person’s single account will be insured up to the new permanent maximum amount, but so will his or her share of all joint accounts, as well as any other of his or her accounts in other ownership categories.

Another legislative change, which went into effect on the last day of 2010, creates a new temporary insurance category that will fully insure all funds, regardless of the dollar amount, but only in checking accounts that pay no interest to the account holder. An example of a possible application of this new insurance is an account in which an individual who has just sold a home temporarily parks the large proceeds from the sale in that account, understanding that no interest will be earned. As the law now stands, this change is temporary, in that the new insurance account category is set to expire at the end of 2012.

In October 2008, Congress increased the basic limit on federal deposit insurance coverage from $100,000 to $250,000. The limit is scheduled to return to $100,000 on January 1, 2014.

The temporary limit now in effect has not changed the fact that a customer has various means by which to effectively raise the applicable limit for the customer’s collection of deposits at any one institution. The basic limit applies separately to different ownership categories. A single account in one name is insured up to $250,000; a joint account for two or more people is insured up to the same limit, per owner; certain retirement accounts, such as IRAs, are covered up to the limit; and deposits meant to pass on to named beneficiaries on the death of the owner can be protected up to $250,000 for each named beneficiary. This last category of deposits is a revocable trust account.

There also are other recent changes that favor depositors in insured institutions. For example, it used to be that the only beneficiaries under a revocable trust account who qualified for additional deposit insurance coverage were the account owner’s spouse, child, grandchild, parent, or sibling. Now an account owner can name almost any beneficiary, such as a more distant relative, a friend, or a charitable organization, and each beneficiary will still benefit from the additional coverage.