D EAR HARRY: We recently had a family disagreement that degenerated into a shouting match over bank insurance. We know that the FDIC insures bank deposits, but what about insurance for earthquakes, fire, theft, floods, etc.? Isn't it true that the FDIC covers losses from financial activity, not so-called acts of God? Don't the banks need separate "private" insurance for these? Please give me the straight whiskey on this before we have a family breakup.
WHAT HARRY SAYS: Like any business, general-insurance needs, such as fire insurance, etc., should be covered by policies with the same kind of companies that insure your home against the occurrence of those perils. The FDIC insures deposits in case the bank fails. A bank may fail because it has suffered financial losses on its lending activities. It may also fail because its property was inadequately protected by insurance against theft or a disastrous fire. In both of these cases, the FDIC would protect depositors for up to $250,000 per account. As a practical matter, banks rarely go bust as a result of nonfinancial activities. Poor management, dishonest management or a bad economy are the usual culprits. I hope you resolve your differences with a handshake all around.