Bank failures once meant depositors could lose everything. Deposit insurance is a guarantee, usually provided by a government or public agency, that depositors will recover their funds up to a stated limit if a bank or similar institution fails. The guarantee is funded by premiums paid by the insured institutions.

In the United States the Federal Deposit Insurance Corporation provides coverage up to $250,000 per depositor, per insured bank, for each account ownership category. Similar schemes exist in most developed economies. The existence of deposit insurance reduces the incentive for bank runs and stabilizes the financial system.

Coverage limits and the types of accounts protected are defined by statute. Depositors with balances above the limit remain at risk for the excess. The insurance does not protect against investment losses in non-deposit products sold by the same institution.

• Guarantee of bank deposits up to a limit
• Protects depositors if the institution fails
• Funded by premiums from member banks
• Reduces risk of bank runs