- If a person has an interest in more than one joint account, what is the extent of his or her insurance coverage?
All joint accounts owned by the same combination of individuals are first added together and the total is insured up to $125,000. In addition, the person’s insurable interest in each joint account held by different combinations of individuals are added together and the total is insured up to the $125,000 maximum.
(a) For example, assume that A and B own a joint account containing $140,000 and A and C own a joint account containing $90,000. The $140,000 account owned by A and B is insured only to $125,000, leaving $15,000 uninsured. Since the interests of the co-owners of a joint account are deemed equal for insurance purposes (except in the case of a tenancy in common if unequal interests are shown on the account of the institution), the $125,000 is prorated equally between A and B, giving each an insurable interest of $62,500; the $90,000 in the other account is prorated equally between A and C, giving each a $45,000 insurable interest in that account. Thus, A has a total insurable interest of $107,500 in the two accounts, and B and C have insurable interests of $62,500 and $45,000 respectively. Since no person’s total insurable interest exceeds the $125,000 limit, the joint account of A and B will receive $125,000 in insurance whereas the joint account of A and C will receive $90,000.
(b) If on the other hand, A and B have a joint account containing $122,000, A and C a joint account containing $119,000, and A and D an account containing $166,000, and A and E an account containing $83,000, the aggregate of A’s prorated interest in the three accounts amounts of $220,000.
However, A’s interest in each joint account will be abated by $95,000/$220,000 or 43.18% (Excess of Coverage Limit / Aggregated Prorated Interest) so as to restrict total insurance payable to A to $125,000.
The apportionment of A’s interest on each joint account will result in the following insurance payments-: A and B – $95,659; A and C – $93,307; A and D – $90,955 and A and E – $65,080. These total $345,000. Therefore an amount of $95,000 will be uninsured.
- If two or more persons, for example a husband and wife, have, in addition to the individually owned accounts of each, a valid joint account in the same insured institution, is each account separately insured?
Yes. If each of the co-owners has personally signed a valid account signature card and has a right of withdrawal on the same basis as the other co-owners, the joint account and each of the individually owned accounts are separately insured up to the $125,000 maximum. (The execution of an account signature card is not required for time certificates of deposit or any other deposit obligation evidenced by a negotiable instrument, but the deposit must in law be jointly owned.) However, the insurance protection on joint accounts is not increased by rearranging the names of the owners, changing the style of the names, or by establishing more than one joint account for the same combination of owners in the same insured institution. No joint account shall in any case be entitled to insurance coverage in excess of $125,000.