Are Escrow Accounts FDIC Insured? | What Banks Cover

Yes, many escrow funds in FDIC-insured banks are protected up to legal limits when each owner’s interest is properly recorded.

Sending thousands of dollars to an escrow account for a home purchase, rent deposit, or legal matter can feel risky. You might wonder whether that money sits under the same federal umbrella as your checking or savings balance. The short answer is that FDIC insurance can protect escrow funds, but only when a few specific rules line up.

This guide walks through how FDIC insurance treats escrow accounts, when protection applies, how limits work for each person behind the account, and where the gaps still sit. By the end, you’ll know what questions to ask before wiring funds and how to lower your exposure when you rely on an escrow agent or mortgage servicer.

Are Escrow Accounts FDIC Insured? Basic Rule In One Line

FDIC insurance does not attach to an “escrow account” label by itself. It attaches to deposits at an FDIC-insured bank. If an escrow account holds qualifying deposits at an insured bank, and the bank’s records show who owns the money, FDIC insurance can pass through to each beneficiary, up to the standard limits at that bank.

So the core checklist looks like this:

• The escrow funds sit at an FDIC-insured bank.
• The balance is in a covered deposit product, such as a checking or savings account.
• The bank’s records and the escrow agent’s records show who the money actually belongs to.
• Each person’s share fits within FDIC limits at that bank for that ownership category.

When those conditions hold, escrow deposits get the same federal protection as your own account, even though they sit in the escrow agent’s name on the bank’s system.

What An Escrow Account Actually Does

An escrow account holds money that one party deposits for the benefit of another party, usually for a specific purpose such as paying property taxes, insurance, or closing costs. The agent—often a lender, title company, broker, or attorney—controls the account and releases funds only when agreed conditions are met.

Mortgage Escrow Or Impound Accounts

For home loans, lenders often add an escrow, sometimes called an impound account, onto the mortgage. A portion of each monthly payment goes into that account to pay taxes and insurance. The Consumer Financial Protection Bureau describes this setup in its explanation of what an escrow or impound account is, where the lender or servicer collects funds and then pays bills on the borrower’s behalf.

In that case, the escrow account usually sits at a bank under the lender or servicer’s name, but the money belongs to the borrower until it’s used to pay charges. That borrower is the “beneficial owner” for FDIC insurance purposes.

Real Estate Closing Escrow

Another common case is a real estate closing. A buyer wires an earnest money deposit or down payment to a title company, settlement agent, or attorney. The agent places the funds in a pooled escrow account and disburses them only when closing conditions are met or the deal falls through.

Here again, the escrow account title may show only the company’s name, yet the funds belong to the buyers and sellers listed in the purchase contract. FDIC rules treat those people as the real owners when pass-through insurance applies.

Other Common Escrow Uses

Beyond real estate and mortgages, escrow accounts can hold:

• Security deposits for rentals and property management.
• Client funds in attorney trust or IOLTA accounts.
• Funds held by brokers for trades or business deals.
• Construction retainage or holdback funds on large projects.

The same FDIC framework applies across these uses, as long as the escrow sits at an FDIC-insured bank and the records identify who owns each share.

Escrow Accounts And FDIC Insurance Limits For Borrowers

FDIC deposit insurance protects “deposits” at insured banks. The agency explains in its guide on understanding deposit insurance that coverage applies up to at least $250,000 per depositor, per insured bank, for each ownership category. Protected account types include checking, savings, money market deposit accounts, and certificates of deposit.

Escrow accounts that hold these products can qualify for the same treatment. Under FDIC rules, if the account is properly titled and the records show each person’s interest, coverage “passes through” the escrow agent to the underlying owners. A buyer’s deposit in a real estate escrow, for instance, counts as that buyer’s deposit at that bank, not the title company’s deposit.

FDIC’s “Your Insured Deposits” brochure explains how ownership categories work. Single accounts, joint accounts, trust accounts, and business accounts each carry separate coverage. In a pooled escrow, each owner’s share is added to that owner’s other balances in the same category at the same bank to measure whether the $250,000 limit is exceeded.

That means a buyer with $200,000 in a personal savings account and a $75,000 earnest money deposit at the same bank, in the same ownership category, would have $25,000 above the standard limit if both amounts qualify as deposits.

Types Of Escrow Accounts And Typical FDIC Treatment

The table below gives a broad snapshot of how FDIC insurance usually treats different escrow setups when the account sits at an insured bank and the records are in order.

Escrow Use	Who Holds The Account	FDIC Insurance Treatment (If Conditions Met)
Mortgage tax and insurance escrow	Lender or servicer	Pass-through to each borrower up to $250,000 per bank, per ownership category.
Real estate closing escrow	Title or settlement company	Pass-through to buyers and sellers based on contract amounts.
Attorney trust / IOLTA account	Law firm or attorney	Pass-through to each client when records show individual balances.
Broker escrow for client funds	Brokerage or agent	Pass-through to each client if the bank and agent keep clear records.
Property management security deposits	Landlord or management company	Pass-through to each tenant where state rules and records support that structure.
Construction retainage account	Title company, lender, or owner	Pass-through to contractors or owners based on written agreements.
Other pooled escrow at a bank	Any escrow agent	Pass-through coverage if the account and records satisfy FDIC requirements.

This table does not change the actual regulations. It only summarizes common outcomes when the bank, escrow agent, and underlying owners all meet FDIC documentation standards.

Conditions Your Escrow Funds Must Meet To Be Insured

FDIC insurance never attaches automatically to the word “escrow.” Instead, FDIC regulations treat these accounts as fiduciary or custodial deposits. Certain conditions must be in place before the federal guarantee reaches the people behind the account.

The Bank Must Be FDIC Insured

The first condition is simple: the escrow account has to sit at a bank whose deposits are covered by the FDIC. The FDIC site explains that its insurance only applies to deposits “at FDIC-insured banks,” not to non-bank firms or investment accounts. The agency’s pages on how FDIC deposit insurance works and “Your Insured Deposits” both stress this point.

If your escrow agent holds funds at a credit union, a foreign bank branch, or a trust company outside the FDIC system, a different regulator or insurer may apply—or there may be no comparable federal guarantee at all.

The Account Must Hold Covered Deposits

FDIC insurance only covers deposits such as checking, savings, money market deposit accounts, and time deposits like CDs. Non-deposit products—mutual funds, stocks, bonds, crypto assets, or annuities—are outside FDIC’s scope even when they are sold at a bank branch. FDIC materials make this distinction plain by listing which products are covered and which are not.

Most escrow accounts use standard deposit products. Still, if you see language about “investing” escrow balances or placing them into money market funds, ask for details. Investment products may carry market risk instead of deposit insurance.

Records Must Show The Beneficial Owners

FDIC rules on fiduciary accounts, found in federal deposit insurance regulations, require the bank’s records and the escrow agent’s records to reflect that the funds are held for others and to identify those owners. The regulations in 12 C.F.R. Part 330 set out how pass-through insurance works for custodial and fiduciary accounts.

In practice, that means the account title or code at the bank needs to indicate that funds are held as agent or trustee, and the escrow agent must keep detailed books showing how much of the balance belongs to each person. If those records are missing or incomplete when a bank fails, FDIC may treat part or all of the balance as the agent’s own funds, which can leave the underlying owners exposed.

FDIC Insurance Limits Still Apply Per Owner

Even when pass-through treatment applies, FDIC limits still cap coverage. The “Your Insured Deposits” guide notes that the standard maximum is $250,000 per depositor, per insured bank, for each ownership category. All of one person’s deposits in the same category at that bank are added together to measure the limit.

If you have large balances across several accounts at the same bank—such as personal savings, CDs, and money held for you in escrow—you need to look at the combined total. Extra coverage may be available with different ownership categories or by using more than one FDIC-insured bank, but that requires planning.

Examples Of FDIC Coverage For Escrow Funds

Walking through a few numbers can make the rules less abstract. These examples assume that all accounts are at FDIC-insured banks, hold covered deposit products, and meet the recordkeeping standards.

Example 1: Earnest Money And Personal Savings At The Same Bank

Maria has $210,000 in a single-owner savings account at Bank A. She wires $60,000 of earnest money to a title company, which holds it in a properly titled escrow account at the same bank. For FDIC purposes, Maria now has $270,000 in single-owner deposits at Bank A. FDIC insurance would protect $250,000 of that amount. The remaining $20,000 would sit above the standard limit.

Example 2: Two Buyers Sharing An Escrow Deposit

James and Riley buy a home together and send a joint $80,000 earnest money deposit to a title company. The escrow account at the insured bank records their equal shares. For FDIC calculations, each person owns $40,000. If each buyer has less than $210,000 in other single-owner deposits at that bank, the escrow funds fall within the standard limit for both.

Example 3: Attorney Trust Account With Many Clients

An attorney holds $1,000,000 of client funds in a pooled escrow at an FDIC-insured bank. The escrow is properly titled, and the firm’s ledger shows each client’s share. FDIC insurance does not look at the $1,000,000 as one block. Instead, it applies the $250,000 limit to each client based on that client’s total deposits at that bank in the relevant ownership category. Many small balances can fit inside FDIC limits even when the pooled account number looks large.

Practical Steps To Protect Money In Escrow

Before you send money to an escrow account, a little checking can spare you a lot of worry. These steps apply whether you are dealing with a mortgage servicer, title company, attorney, or property manager.

• Ask which bank holds the escrow and confirm that it is FDIC-insured.
• Ask which type of deposit product the escrow uses (checking, savings, money market deposit account, or CD).
• Request written confirmation that the account is set up as a fiduciary or escrow account, not as the agent’s personal operating account.
• Request a copy or summary of how your share will be tracked in the agent’s records.
• Estimate how that escrow balance will interact with your other deposits at the same bank under FDIC limits.

For large balances, many people spread funds across more than one FDIC-insured bank or use different ownership categories once the $250,000 limit is in sight.

Checklist For Safer Escrow Deposits

The checklist below summarizes the main points you can review before or shortly after you place funds into escrow.

Step	What To Ask Or Confirm	What That Tells You
1. Bank status	Is the escrow bank listed as FDIC-insured?	Shows whether federal deposit insurance can apply at all.
2. Account type	Is the escrow in a checking, savings, MMDA, or CD?	Confirms the balance sits in a covered deposit product.
3. Account title	Does the title show “escrow,” “trust,” or similar fiduciary wording?	Signals that the bank treats it as funds held for others.
4. Beneficiary records	Does the agent keep a ledger showing your exact share?	Supports pass-through coverage in FDIC’s rules.
5. Total exposure	How does your escrow share combine with your other deposits at that bank?	Shows whether you stay under or over the $250,000 limit.
6. Use of funds	How and when will the escrow funds be disbursed?	Clarifies how long money may sit in the account and at what level.
7. Written terms	Do the escrow agreement and disclosures match these answers?	Gives you a written record if questions arise later.

Risks FDIC Insurance Does Not Handle For Escrow Accounts

FDIC insurance only guards against the loss of covered deposits when an insured bank fails. It does not protect against every risk that can affect escrow money. Even when FDIC coverage is in place, you still need to watch for other weak spots.

• Wire fraud and impostor scams: Criminals sometimes send fake wiring instructions that route money to the wrong account. FDIC insurance does not make someone whole when funds never reach the escrow bank in the first place.
• Misuse by the escrow agent: If an unscrupulous agent steals funds or commingles them improperly, that can trigger legal claims against the agent, but FDIC coverage may not solve the shortfall.
• Contract and timing disputes: Disagreements over whether conditions are met usually fall under contract law. FDIC insurance does not pick a winner in that dispute.
• Investment risk: If escrow balances are “swept” into non-deposit investment products, market losses sit outside FDIC protection.

Because of these gaps, it pays to work with reputable agents, verify instructions by phone using known contact numbers, and keep copies of all agreements and receipts.

How To Check Whether An Escrow Account Is FDIC Insured

If you already have funds in escrow and want to confirm the status, you can take a few direct steps.

1. Ask the escrow agent for the exact legal name of the bank that holds the escrow account.
2. Look up that bank using FDIC’s BankFind tool linked from the agency’s deposit insurance pages.
3. Request the account title as it appears on the bank’s records and ask whether it is coded as a fiduciary or escrow account.
4. Ask for a statement or summary that shows the total balance and your share as of a recent date.
5. Compare your share with your other deposits at the same bank to see how close you are to the $250,000 limit for that ownership category.

For very large balances or complex ownership setups, some people review the structure with a lawyer or financial professional who understands FDIC rules, especially those in Part 330 of the federal deposit insurance regulations published in the electronic Code of Federal Regulations.

Main Takeaways On FDIC Insurance For Escrow Accounts

FDIC insurance can protect escrow balances, but only when the money sits in covered deposits at an FDIC-insured bank and the records are clear about who owns each share. The label “escrow account” by itself doesn’t guarantee anything.

For most consumers with typical mortgage escrow accounts or modest earnest money deposits, that structure often works well. Funds sit in standard deposit products, the bank is insured, and the escrow agent’s records support pass-through coverage. The bigger risk in many cases is not bank failure, but fraud or misuse before closing.

When amounts are large or when you already keep significant deposits at the same bank, it becomes more important to understand how FDIC limits apply. FDIC resources such as “Your Insured Deposits” and its general guide on understanding deposit insurance explain the ownership categories and limits in more depth, and federal regulations at 12 C.F.R. Part 330 spell out how pass-through coverage works for escrow and other fiduciary accounts.

This article gives general information based on those public sources. For decisions about a specific transaction or large balance, direct conversations with the bank, the escrow agent, and qualified advisers can help you match the structure to your own risk tolerance and goals.