Deposit insurance

A government-backed guarantee that repays depositors when an institution fails, up to a stated limit, per depositor, per institution.

Example

Under an illustrative 100,000 limit, 250,000 held at one institution leaves 150,000 uncovered - 60.0% of the balance - while the same 250,000 split across three institutions is covered in full.

Important

The limit is per institution, not per account, and two brands sharing one banking licence usually share one limit. Schemes, limits and payout rules differ by country, so look up your own rather than carrying a figure from somewhere else.

Related terms

• Bank deposit — Money handed to a bank in exchange for a claim on it. The bank owns the money and lends most of it out; what you hold is a debt that institution owes you, repayable on the terms of the account.
• Counterparty risk — The risk that the party on the other side of an arrangement fails to pay what it owes you.
• Creditor — Someone who has lent money and is owed repayment, ranked ahead of equity holders if the borrower runs into trouble.

Lessons that explain it

• A deposit is a loan you made to a bank — Money in a savings account is not money you are holding. It is a debt the bank owes you, and what makes it safe is a government guarantee with a limit - not a property of money itself. (9 min)
• Appraising one account: rate, access, cover and the expiry date — Six checks on one specific account. The headline rate is the one everybody runs and the only one that can be withdrawn without warning - so it belongs fourth, not first. (12 min)
• The nominal safety that loses money anyway — The balance cannot fall, and that is exactly why the real risk in this class is invisible. Inflation reduces what the money buys, and the tax is levied on the nominal interest rather than on what you actually gained. (13 min)

All 578 terms in the Investing glossary