Are index-linked Certificates of Deposit (CDs) FDIC insured?
The principal amount of an Index-linked CD is insured by the FDIC up to the maximum applicable deposit insurance coverage. However, any contingent interest owed to the investor is the obligation of the issuing bank and is not insured by the FDIC. In order to determine the amount of FDIC insurance coverage, the investor must include the principal amount of the index-linked CD, together with all other deposits maintained by the investor at the bank. The current maximum insurance coverage of $250,000 is temporary and is set to expire on December 31, 2013. On January 1, 2014, the standard insurance amount is scheduled to return to $100,000 per depositor for all account categories except IRAs and certain other retirement accounts, which will remain at $250,000. Because many of these CDs do not mature for several years, it is important to consider that FDIC insurance coverage may revert back as of 2014 to the $100,000 limit. For any amount over the maximum applicable deposit insurance coverage, the investor is subject to the direct credit risk of the issuing bank.