If you’ve been reading the news lately, you may have heard of the recent failure of Indymac Bank. After facing a liquidity crisis by making too many high risk loans, Indymac has been officially taken over by the FDIC. This is the second largest bank failure in United States history, and it is expected that the FDIC will have to disburse 4 to 8 billion dollars to the former customers of Indymac, or 10% of the total FDIC fund. The past few days have seen lines of angry people trying to withdraw their funds from the failed bank, but what many of them don’t know is they may not walk out with all their money.

What Is the FDIC?
Most people aren’t fully aware of exactly what the FDIC is, much less what their rights are under it. Most know that a bank with an FDIC seal is a good thing, but not why. The Federal Deposit Insurance Corporation was created after the stock market crash and massive bank failures of the Great Depression. During that time, people were simply out of luck if a bank failed. Once the bank closed, the customers usually were broke (hence the tendency of many of our grandparents to stuff money under the mattress). To counteract the devastating effect this had on the rest of the country, the government created a corporation to insure depositors money.

Account holders are now insured for up to $100,000 on regular deposit accounts, such as checking, savings, or CDs (A recent change to law in 2005 changed the coverage of IRAs from the standard $100,000 to $250,000). Because the FDIC has taken over Indymac, each customer is only allowed to withdraw up to that $100,000 limit. Customers who had more than that in their accounts will have to sue Indymac for the balance, which could take years and never result in a payout. So does this mean you’re screwed if you have more than $100,000 in your bank? Not necessarily, if you know how the system works.

The Breakdown
The FDIC has a few rules that, once you know how they work, can cover every penny you have.

- Each depositor is covered for up to $100,000 for accounts held in their name at a financial institution that is a member of the FDIC.
- If the depositor has accounts at another institution in addition to the first, the depositor is covered for $100,000 at the second institution as well. Therefore the depositor will have $200,000 of coverage between the two banks. Have accounts at eight banks? You have $800,000 of coverage, as long as you don’t exceed the $100,000 limit at any one bank.
- Accounts held in a different title are considered separate. Joint accounts, trusts, or beneficiary accounts are all considered to have their own $100,000 coverage.

The rules get a little more complicated the more spread out the money gets, but these are the basics that would apply to most people. Remember that banks aren’t guaranteed to be around forever, so you should take as many precautions as you can to protect your hard earned cash.

People in the Midwest have been facing torrential downpours for days. Many have been forced to evacuate, leaving their homes and most of their possessions behind. Many have also opted to stick it out — to fight off Mother Nature with sandbags and pumps. Making decisions in this sort of situation is hard: you have to balance the emotional and financial, decide whether to stay or what to take.

There are a few points that can help speed up the decision-making process — crucial in a natural disaster when time is of the essence.

Think first of your own needs.

You decisions should be made on the basis of your ability to take care of yourself and the people who depend on you. Deciding whether (and when) to evacuate isn’t simply a matter of how much stuff can you cram into your car: it’s a question of whether you’re likely to get hurt if you stay. In a natural disaster, there may be very little you can do to protect your property — but you certainly don’t want to face doctors’ bills on top of the financial losses you may face.

As long as you are healthy, you can find work and build back up. In my experience, it’s more important to protect yourself and your family than stuff that you can replace.

What is truly irreplaceable?

You can buy a new computer or replace the floors in your home. You can’t go back in time and take new pictures of your children as babies. As you pack for any sort of evacuation, always remember that there are more stores down the road. While you should take some spare clothing and food, focus on taking those things you can’t pick up at the first Wal-Mart you pass.

It’s worth taking a look at your insurance policy every once in awhile, as well. In an emergency, you aren’t going to have time to go down the list of what items your insurance company will replace. You don’t want to waste car space on the property that you’ve been paying the insurance company to cover in just this situation, though.

Don’t forget your paperwork.

No matter whether you stay or leave, you are probably going to need that insurance policy you’ve been paying for all these years. Make sure you know exactly where that paperwork is and keep it safe and dry. You’ll want to do the same with your personal papers (birth certificate, ID, etc.), as well as phone numbers for the insurance company. No one wants to have to deal with filing a claim — especially when plenty of the neighbors will be doing the same thing, but making sure that you’re prepared will make it easier to replace all your replaceable stuff.