CD Deposits in Excess of $100,000 Will Not be Covered After December 31, 2009

Editor's Note: Subsequent to the original publication of this article, the FDIC acted to permanently raise FDIC ownership to $250,000 per deposit in each ownership category at a single financial institution. More information on FDIC coverage can be found at fdic.gov.

In October, the FDIC raised the limit on deposit insurance from $100,000 per person to $250,000 per person. But the increase is not permanent. And after December 31, 2009, FDIC is set to roll back its coverage. That's important information for anyone interested in investing in longer-term certificates of deposit (cds).

Why?

If you invest $200,000 in a five year CD now, you're entire $200,000 will be covered until December 31, 2009. After that, once coverage rolls back, only $100,000 will be covered, even though when you opened the CD the entire amount was insured. I called the FDIC today and they confirmed this.

So, if you are interested in opening a longer-term CD and want your investment to remain fully insured, make sure you stay within the $100,000 limit. There is a good chance that the FDIC will extend the increased coverage, but not guarantee. And you don't want to be stuck in a CD with a portion of your investment no longer insured.