Understanding FDIC and SIPC Insurance

Know the difference

FDIC insurance protects your assets in a bank account (savings or checking). SIPC insurance, on the other hand, protects your assets in a brokerage account. These types of insurance operate very differently. For your own peace of mind, become acquainted with how they work and how they protect you.

What is FDIC insurance?

The FDIC—or Federal Deposit Insurance Corporation—is a U.S. federal agency that protects you against the loss of your deposit accounts (such as checking and savings) if your FDIC-insured bank fails. Here are three important facts to know about FDIC insurance:
  • The basic FDIC insurance amount is currently $250,000 per account holder per insured bank for deposit accounts and $250,000 for certain retirement accounts deposited at an insured bank. These insurance limits include both principal and accrued interest.
  • Previously, FDIC coverage on deposit accounts was $100,000, but this amount was increased to $250,000 on October 3, 2008. The FDIC limits are currently scheduled to revert to $100,000 on January 1, 2014.1
  • The FDIC does not insure money invested in stocks, bonds, mutual funds, life insurance policies, annuities, municipal securities and money market funds, even if these investments were bought from an insured bank.

How is FDIC insurance coverage determined?

The FDIC insurance limit applies to each account holder at each bank. Here is how the FDIC defines coverage for different account holders by some common ownership types: 
  • Single accounts are deposit accounts (e.g., checking, savings) owned by one person. FDIC insurance covers up to $250,000 per owner for all single accounts at each bank.
  • Joint accounts are deposit accounts owned by two or more people. FDIC insurance covers up to $250,000 per owner for all joint accounts at each bank.
  • Certain retirement accounts, such as IRAs and self-directed defined contribution plans, are covered by FDIC insurance up to $250,000 for all deposits in such retirement accounts at each bank.

What Is SIPC Insurance?

The Securities Investor Protection Corporation—or SIPC—is a nonprofit membership corporation that was created by federal statute in 1970.

Unlike FDIC insurance, SIPC does not provide blanket coverage. Instead, SIPC protects customers of SIPC-member broker-dealers if the firm fails financially. Coverage is up to $500,000 per customer for all accounts at the same institution, including a $250,000 limit for cash.

When you think about it, this makes sense. After all, market losses are a normal part of the risk of investing. That is why SIPC does not protect you when the value of your investments falls.

For more information about SIPC, go to SIPC.org.
Our Two Cents
It's always wise to put your money in an FDIC-insured bank. Whether it’s your emergency fund or short-term cash, there’s no need to take unnecessary risks.


1. On October 3, 2008, FDIC deposit insurance temporarily increased from $100,000 to $250,000 per depositor through December 31, 2009. On May 22, 2009, this increased coverage was extended through December 31, 2013. IRAs and certain other retirement accounts for which the deposit insurance limit already was $250,000 prior to October 3, 2008, will continue to be insured up to $250,000. CDs with a maturity date after December 31, 2009, which had an insurance limit of $100,000 prior to October 3, 2008, will temporarily have an insurance limit of $250,000, but are currently scheduled to revert to the $100,000 limit on January 1, 2014.

The information on this website is for educational purposes only. It is not intended to be a substitute for specific individualized tax, legal or investment planning advice. Where specific advice is necessary or appropriate, consult with a qualified tax advisor, CPA, financial planner or investment manager.

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