There are several organizations that have been set up to protect consumers' financial assets — the FDIC which covers deposits in banks and savings associations, the NCUA which does the same for most credit unions and the SIPC which covers investors' assets. It's important to be aware of your rights and how these institutions can keep your money safe.
We break down the difference between these organizations and what they cover.
How does FDIC insurance work?
Established during the Great Depression, the Federal Deposit Insurance Corp (FDIC) ensures that your bank deposits are safe, even if the bank goes under. The FDIC — which is funded by premiums paid by banks and savings associations — protects up to $250,000 in individual deposit accounts and up to $250,000 for each person’s share of joint accounts.
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FDIC insurance covers money in checking accounts, traditional and high yield savings accounts, as well as money market deposit accounts, certificates of deposit (CDs) and official items issued by a bank, such as cashier’s checks and money orders. The coverage extends to depositors’ accounts at each insured bank, including IRAs, living trust accounts and payable-on-death accounts. To determine whether a bank is FDIC insured, look for the FDIC sign at the bank, go to FDIC.gov or call 877-275-3342. You can find out if your accounts are fully covered with the FDIC’s Deposit Calculator.
The FDIC doesn’t insure money invested in stocks, bonds, mutual funds, life insurance policies or annuities, even if these investments are purchased at an insured bank. It also doesn't cover safety deposit boxes or their contents.
If you want to find a home for your savings that is federally insured, our tool — in partnership with Bankrate — will help you find an account that's right for you.
How does NCUA insurance work?
Deposits in federal credit unions are covered by the National Credit Union Administration (NCUA), a federal agency set up in 1970. It operates in a similar way to FDIC, protecting up to $250,000 per credit union member (whether in an individual or a joint account) via the National Credit Union Share Insurance Fund. NCUA states that "Credit union members have never lost even a penny of insured savings at a federally insured credit union."
Some credit unions are state-chartered and may be outside the federal-insurance framework. These credit unions might be covered by private insurance, but it is important to check the deposit limit and coverage before you put your hard-earned deposits into one of these institutions. Find out more information on credit unions at MyCreditUnion.gov and use the Share Estimator tool on that site to check how your deposits might be covered in the event of a credit union failing.
How does SIPC insurance work?
The Securities Investor Protection Corp. (SIPC) is an independent body that protects investments and brokerage accounts. Brokerages are required by law to keep customers’ investments separate from their own funds. If the firm fails, SIPC will oversee the liquidation of member firms to recover customers’ missing assets, cash and securities.
SIPC first divides up the broker’s remaining assets among investors, then uses its own funds — up to $500,000 per account, with a limit of $250,000 in cash — to buy the same number of shares a customer originally owned and replace the missing cash. Depending on the amount of property the brokerage is able to recover, a customer may receive more than $500,000. SIPC has been successful in making most customers whole, says Josephine Wang, CEO of SIPC.
SIPC doesn’t get involved until the firm under duress has exhausted all other options, such as merging with another brokerage firm. (Look for the SIPC disclosure on a brokerage firm’s website, or check the membership directory.)
SIPC isn’t a government agency and has no authority to investigate fraud at brokerage firms. That’s up to Finra, the industry’s self-regulatory organization, and the Securities and Exchange Commission (SEC), which refers brokerage failures to SIPC. After that, SIPC will file an application in the federal district court to notify customers.
What is the FDIC insurance limit?
- Federal Deposit Insurance Corp. (FDIC): Insures $250,000 per depositor, per bank, for each account ownership category.
- What it covers: checking, savings and money market deposit accounts, certificates of deposit, cashier’s checks, and money orders.
- How to get your money back: If your bank fails, you don’t have to do anything — the FDIC will contact you with information on how your insured funds will be returned.
What is the NCUA insurance limit?
- National Credit Union Administration (NCUA): Insures $250,000 per depositor, per credit union account.
- What it covers: checking, savings and money market deposit accounts, certificates of deposit, cashier’s checks, and money orders.
- How to get your money back: If your credit union fails, you don’t have to do anything — the NCUA will contact you with information on how your insured funds will be returned.
What is the SIPC insurance limit?
- Securities Investor Protection Corp. (SIPC): Guarantees up to $500,000 per brokerage account (with a limit of $250,000 in cash).
- What it covers: stocks, bonds, mutual funds and cash that’s on deposit to purchase securities.
- How to get your money back: If your brokerage fails, you must file a claim, and you should do it as soon as possible. If your securities decline in value after you file your claim, you won’t be reimbursed for losses that occur while your account is in limbo.
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