Be aware of different limits for accounts insured by FDIC

Q: As a business if I have $250K in savings at one institution and another $250K at another institution, are they both insured up to the $250K limit?

A: The Federal Deposit Insurance Corp. insures up to $250,000 in business accounts including certificates of deposit, checking, NOW, savings and money market accounts at each participating bank. That means all of your money at both banks would be fully insured.

If your company is organized as a corporation or partnership, your personal accounts at those institutions are separately covered by FDIC insurance as well.

However, that's not necessarily the case if you operate as sole proprietor of an unincorporated business.

Deposit accounts under such an ownership arrangement are insured as the single funds of the person who owns the business. That means the $250,000 insurance limit is spread between the business account, plus any personal non-retirement accounts titled in the name of the sole proprietor.

So if you have $150,000 in a sole proprietor business account and the same amount in a personal checking account and CDs titled in your name alone, $50,000 of your deposits would be ineligible for FDIC insurance.

This aggregate limit applies only to single accounts held in your name only. Since the government views joint accounts as a different deposit ownership category than a sole proprietorship, the full FDIC insurance would apply for personal accounts you hold jointly with a spouse or anyone else.

Q: Are other investments insured?

A: Regardless of how your business is organized, the FDIC does not insure investments in stocks, bonds, life insurance policies, mutual funds, annuities, or municipal securities, even if they you bought them through an insured bank. The same rule applies to personal accounts.

For more information, contact the FDIC's help desk at 877-275-3342 from 8 a.m. to 8 p.m. Eastern Time.

Q: What are the differences between mortgage insurance?

A: There is one important difference. It will usually take you longer to pay off your mortgage insurance if you have an FHA loan. With an FHA mortgage, you cannot use home price appreciation in your calculations. In order to cancel your mortgage insurance you must pay down 22 percent of your balance and then it will be cancelled.

Without being able to include price appreciation when totaling your equity, at 6 percent it would take you about 12.6 years to reach the 22 percent equity level on the balance cited above. To cancel any type of mortgage insurance, you must have a good record of on-time payments or your request to cancel would be turned down. Mortgage insurance is a way of protecting the lender from borrower default.

The upfront costs of these mortgages are roughly the same. The FHA requires a 3.5 percent down payment, which can be a gift, and an insurance premium totaling 1.75 percent of the loan amount. With a conventional mortgage you usually have to make a 5 percent down payment using your own money.