The limit was boosted from $100,000 to $250,000 in late 2008 as the financial crisis exploded, taking a toll on consumer confidence in the banking system. The increase was sought to allay consumer fears.
The temporary increase had been set to expire at the end of this year.
The extension of the higher limit comes as the number of financial institutions on the Federal Deposit Insurance Corp.'s "problem bank" list increased at the end of last year to 252, the highest number since 1994.
The banks on the list represent about 3 percent of the 8,300 banks in the country. But bank failures are accelerating in the recession. So far this year, 34 banks have been seized by regulators, the latest — BankUnited in Florida — on Thursday.
Last year, 25 banks went under, compared with just three in 2007.