Understanding How FDIC and SIPC Insurance Work

The FDIC (Federal Deposit Insurance Corporation) is a federal agency that insures U.S. bank deposits in the event of bank failures. It was created in 1933 to instill public confidence and promote stability in the financial system. As of 2023, the FDIC insures deposits up to $250,000 per depositor, per insured bank, for each account ownership category. Ownership categories include single accounts, joint accounts, revocable trusts, irrevocable trusts, corporate accounts, etc. There are numerous scenarios in which your assets may or may not be insured depending on the specifics of your ownership category and account value. You can view some examples of these scenarios on the FDIC website: www.fdic.gov/resources.

The SIPC (Securities Investor Protection Corporation) is a nonprofit corporation created under U.S. federal law to protect the clients of brokerage firms that are forced into bankruptcy. SIPC members include all brokers and dealers registered under the Securities Exchange Act of 1934, all members of securities exchanges, and most National Association of Securities Dealers (NASD) members. SIPC insures customers’ accounts for up to $500,000 in securities, including a $250,000 limit for cash. Securities include stocks, bonds, mutual funds, ETFs, municipal bonds, treasury bonds, money market funds, CDs, 401k assets, etc. SIPC does not cover investment losses due to market fluctuations.

Many brokerage firms also provide additional “excess of SIPC coverage” through private insurers. This excess coverage gets used when SIPC coverage is exhausted. Fidelity provides excess of SIPC coverage of up to an aggregate of $1 billion through Lloyds of London, which is the maximum currently available in the brokerage industry.

If you have any questions about FDIC or SIPC, please contact us!

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