SIPC vs FDIC: Do You Really Know the Difference Between Them?

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Whether you’re storing money in a bank account or investing in the market, you want some assurance that it’s safe. Federal Deposit Insurance Corporation (FDIC) and the Securities Investor Protection Corporation (SIPC) ensure banks and other financial institutions provide protection for your assets. But they are not quite the same when it comes to covering up. If you have bank accounts or investment accounts, it’s important to understand the difference between SIPC versus FDIC protection.

What the FDIC, and what does it do?

Federal Deposit Insurance Corporation an independent federal agency that protects deposit accounts at banks and other financial institutions. The FDIC was formed in 1933 and provides coverage to more than 5,000 institutions as of March 2021. That figure doesn’t include credit unions, which are insured by a separate entity. National Credit Union Administration (NCUA),

FDIC insurers hold certain types of deposit accounts at FDIC-insured banks, including:

  • checking accounts

  • savings accounts

  • money market accounts

  • certificate of deposit (CD) accounts

  • Negotiable Order of Withdrawals (NOW) Accounts

The FDIC may also insure specific instruments issued by banks, such as money orders or cashier’s checks. This insurance coverage designed to protect customers when a bank failure,

Say your bank closes unexpectedly and temporarily closed. If the bank is FDIC-insured, money doesn’t disappear from your accounts. Instead, the FDIC can do one of two things.

Firstly, it can arrange for the sale of a failed bank to another bank. So if you’re used to banking with ABC Bank, the FDIC can arrange for it to be purchased by XYZ Bank. You’ll then become a customer of XYZ Bank without losing access to your money along the way.

If there no ready buyer for the failed bank, the FDIC may pay the money directly to depositors. This involved sending checks to people who had accounts with the bank. It may take a few days to receive payment in this scenario but again, your money doesn’t disappear just because the FDIC protects it.

What SIPC, and what does it do?



securities investor protection corporation Protects assets held in brokerage accounts. For example, if you’ve set up an online brokerage account or use an investing app, you likely have SIPC coverage. The SIPC’s role to protect investors from the negative effects that can occur when a brokerage is in financial trouble.

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For example, let’s say you hear about a new investing app that’s trending. You decide to open an account but after six months the startup closes. If the brokerage had SIPC insurance, your assets would be protected. Covered assets held in a brokerage account may include:

It important to note that there is one thing SIPC does not do and that is to protect investors from financial loss. So if you invest $1,000 in a hot stock that expires, the SIPC is not responsible for returning your money.

SIPC vs. FDIC: Coverage Limits

FDIC insurance coverage not unlimited. The FDIC insurance limit is $250,000 per individual, per bank, and per ownership category.

Like the FDIC, the SIPC places limits on coverage. The SIPC coverage limit is $500,000 in net worth per client. Of that $500,000, $250,000 could be cash. It is useful to know if you regularly keep uninvested cash in your brokerage account.

Like the FDIC, this limit applies to all assets you own at the same institution. If you have multiple brokerage accounts with different companies, the SIPC limit will apply to each one, assuming brokerage SIPC coverage.

Here are some examples of what your coverage could look like, depending on whether you are single or married and the types of accounts you have.

Scenario 1: You are single and have a checking and savings account at the same bank.

Having multiple accounts does not mean that the $250,000 limit applies to each account. Instead, the FDIC insures all of your single accounts at a single bank up to a total of $250,000. However, you can overcome this limit by opening single accounts on multiple banks,

Scenario 2: You are married and have a joint checking account and a joint savings account.

When a deposit account is owned by two or more people, each co-owner’s share of the account is insured up to $250,000. This includes all the accounts of the same bank.

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Let’s say you have a balance of $250,000 joint investigation and a balance of $250,000 in combined savings. Under FDIC rules, both you and your spouse are covered up to the full $250,000 limit.

Scenario 3: You are married with a joint checking account but have individual savings accounts.

The type of ownership determines your FDIC coverage. So again, let’s assume that you and your spouse have $250,000 in a joint checking account balance in this scenario. You also have $250,000 in a savings account that is in your name only.

In this case, you would each have $125,000 of coverage for the joint checking account. But you’ll also be covered for the full $250,000 balance in your sole-proprietor savings account. The FDIC offers an online tool called EDE estimator To help you determine your coverage limits.

SIPC vs. FDIC: Key Differences

Understanding the difference between SIPC vs FDIC is important in case the worst happens and your brokerage or bank fails. not all banks And brokerages maintain FDIC or SIPC coverage, so if you have money at an institution that isn’t covered, you may have a hard time trying to recover any of your savings or investments.

Assuming you’re doing business with an FDIC- or SIPC-insured bank or brokerage, a failure may be nothing more than an inconvenience. Any number of institutions can act to ensure that you have access to your funds as soon as possible after the bank or brokerage closes.

The easiest way to find out if you have any type of coverage is to ask. Banks typically advertise their FDIC-insured status online and at branch locations, so it is relatively easy to verify. With a brokerage, you may have to dig a little deeper into the fine print to find out whether the company is SIPC-insured. If you can’t find the answer yourself, the next step is to contact the brokerage.

SIPC vs. FDIC: The Ultimate Comparison



With SIPC and FDIC insurance, one is not better than the other because they both protect you in different ways. If you have bank accounts or brokerage accountHaving both types of coverage can help you feel confident about the safety of your savings or investments. Nor does it cost you anything. Still, keep in mind that none of them protect you from investment losses. SIPC and FDIC insurance are not meant to make you whole if an investment doesn’t go according to plan.

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ground level

Knowing the difference between SIPC vs FDIC is helpful in managing your money and keeping it safe. The former is for clients of broker-dealers who go bankrupt. (There are similarities in purpose between SIPC and Pension Benefit Guarantee Corporation, On the other hand, the FDIC is for the customers of the banks. The most important thing to keep in mind is the extent of coverage. If you have more than one bank account or brokerage account, be aware of how much coverage you have at each institution you do business with.

investment tips

  • Consider talking to a financial advisor About the way to maximize your account selections. Finding a financial advisor doesn’t have to be difficult. SmartAsset’s Free Tool Matches you with three vetted financial advisors serving your area, and you can interview your advisor matches for free to decide which is right for you. If you are ready to find an advisor who can help you achieve your financial goals, get started now,

  • If you are interested in adding alternative investments to your portfolio, such as foreign currencies or GoodsNote that SIPC does not extend coverage to them because they are not considered securities. SIPC also excludes futures contracts unless they are held in a margin account, so consider carefully before diversifying with these investments.

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