What is FDIC Insurance? Plus Other Agencies that Protect Your Money

Amid the flurry of changes the Trump Administration is making, key regulatory agencies such as the Federal Deposits Insurance Corp (FDIC) might be getting overhauled.

While no official plans have been announced, Trump's advisers have discussed the possibility of shrinking or consolidating the FDIC, along with other regulatory agencies.

It's worth taking some time to refresh your understanding of what the FDIC does, along with similar organizations, such as the National Credit Union Administration (NCUA) and the Securities Investor Protection Corp. (SIPC). All three provide key protections to your money, but each insures different types of accounts.

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It's important to be aware of your rights and how these institutions can protect your savings. We break down the differences between these organizations and what they cover.

What is FDIC insurance?

Established during the Great Depression, the Federal Deposit Insurance Corp (FDIC) ensures that your bank deposits are safe, even if a 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 a joint account.

While no insured deposits have been lost since it was created, the FDIC is here to help, by guaranteeing that your money (up to that $250,000 coverage limit) is safe, even if a bank collapses.

FDIC insurance protects money in checking, 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.

It also covers other types of deposit accounts, such as IRAs, living trust accounts and payable-on-death accounts.

To determine whether your bank is FDIC insured, look for the FDIC sign at the bank, go to FDIC.gov or call 877-275-3342. You can also 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.

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 NCUA insurance?

Just as the FDIC protects your money in banks, the National Credit Union Administration (NCUA) protects money held in federal credit unions. The NCUA is a federal agency set up in 1970 to provide deposit insurance for credit union members.

It insures up to $250,000 per credit union member (whether in an individual or a joint account) via the National Credit Union Share Insurance Fund. The NCUA states, "Credit union members have never lost even a penny of insured savings at a federally insured credit union."

Note that some credit unions are state-chartered and might be outside the federal-insurance framework. These credit unions might be covered by private insurance, but it's important to check the deposit limit and any insurance coverage before you put your hard-earned cash into one of these institutions.

Find 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.

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 SIPC insurance?

The Securities Investor Protection Corp. (SIPC) is an independent body that protects investments and brokerage accounts. It protects up to $500,000 in your brokerage account, including up to $250,000 in cash.

If a firm goes under, the SIPC ensures investors who had accounts with that brokerage get their cash, stocks and other assets back.

If any cash or securities are missing, the SIPC first divides the brokerage’s remaining assets among investors. Then it uses its own funds to replace missing cash (up to $250,000) and buy the same number of shares the customer originally owned.

Depending on the amount of property the brokerage is able to recover, a customer could receive more than $500,000. The limit only refers to the maximum amount the SIPC will pay out of its own funds for cash or securities that couldn't be recovered.

With that said, the SIPC has been successful in making most customers whole, says Josephine Wang, CEO of SIPC.

The 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.)

The 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 the SIPC. After that, the SIPC will file an application in the federal district court to notify customers.

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 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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