SIPC vs. FDIC: Do you really know the differences between them?


Whether you are saving money in a bank account or investing it in the market, you want peace of mind that it is safe. The Federal Deposit Insurance Company (FDIC) and the Securities Investor Protection Corporation (SIPC) ensure that banks and other financial institutions provide protection for your assets. But they’re not exactly the same when it comes to what they cover. If you have bank accounts or investment accounts, it’s important to understand the differences between SIPC and FDIC protections.

What is the FDIC and what does it do?

The Federal Deposit Insurance Company is an independent federal agency that protects deposit accounts with banks and other financial institutions. Founded in 1933, the FDIC provides coverage for more than 5,000 institutions as of March 2021. This number does not include credit unions that are insured by a separate entity, the National Credit Union Administration (NCUA).

FDIC underwriters insure certain types of deposit accounts held at FDIC-insured banks, including:

  • verify accounts

  • savings accounts

  • money market accounts

  • Certificate of Deposit (CD) accounts.

  • Accounts with Negotiable Payout Order (NOW).

The FDIC can also insure certain bank-issued instruments, such as money orders or cashier’s checks. This insurance cover is intended to protect customers if a bank fails.

Suppose your bank unexpectedly goes under and is temporarily closed. When the bank is FDIC-insured, the money in your accounts doesn’t just disappear. Instead, the FDIC can do one of two things.

First, it can arrange the sale of a failed bank to another bank. So if you are used to banking with ABC Bank, the FDIC could arrange for XYZ Bank to buy you. You will then become a customer of XYZ Bank without losing access to your money.

If there is no willing buyer for a failing bank, the FDIC can disburse funds directly to depositors. This involves sending checks to people who had accounts with the bank. In this scenario, it may take a few days for you to receive payments, but again, your money doesn’t simply disappear because the FDIC protects it.

What is the SIPC and what does it do?



The Securities Investor Protection Corporation protects assets held in brokerage accounts. For example, if you have set up an online brokerage account or use an investment app, it is possible that you have SIPC coverage. The role of the SIPC is to protect investors from negative repercussions that can occur when a broker encounters financial difficulties.

Let’s say you hear about a new investing app that’s trending. They decide to open an account, but six months later the startup goes bankrupt. If the brokerage firm had SIPC insurance, your assets would be protected. Covered assets held in a brokerage account may include:

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

SIPC vs. FDIC: Coverage Limits

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

Like the FDIC, the SIPC imposes limitations on coverage. SIPC coverage limit is $500,000 total value per customer. Of that $500,000, $250,000 may be cash. This is useful to know if you regularly hold uninvested money in your brokerage account.

Just like the FDIC, this limit applies to all assets you have with a single institution. If you have multiple brokerage accounts with different companies, the SIPC limits apply to each one, provided the mediation has SIPC coverage.

Here are some examples of what your coverage might look like, depending on whether you’re single or married and what type 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 will insure all individual accounts you hold with the same bank for a total of up to $250,000. However, you can bypass this limitation by opening individual accounts at several 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 accounts at the same bank.

Let’s say you have a balance of $250,000 joint control and a balance of $250,000 in shared savings. Under FDIC rules, you and your spouse would be insured up to the full limit of $250,000.

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

Ownership type determines your FDIC coverage. So again, in this scenario, you and your spouse have $250,000 in a joint checking account. You also have $250,000 in a savings account in your name only.

In this case, you would each have $125,000 coverage for the joint checking account. But you would also be covered for the entire $250,000 balance in your one-owner savings account. The FDIC offers an online tool called EDIE the appraiser to help you determine your coverage limits.

SIPC vs FDIC: Key Differences

Understanding the differences between SIPC and FDIC is important in the event that a worst-case scenario occurs and your broker or bank fails. Not all banks and brokerage firms maintain FDIC or SIPC coverage, so if you have money at an institution that isn’t covered, you might have trouble recovering your savings or investments.

Assuming you are doing business with an FDIC or SIPC insured bank or brokerage, a default can be nothing more than an inconvenience. Any institution can act to ensure you have access to your funds as soon as possible after a bank or broker has closed.

The easiest way to find out if you have either type of coverage is to ask. Banks typically advertise their FDIC insured status online at branch locations, so it’s relatively easy to check. When it comes to brokerage, you may need to delve a little deeper into the fine print to see if the business is SIPC insured. If you cannot find the answer yourself, contacting the agent is the next step.

SIPC vs. FDIC: Final Comparison



When it comes to SIPC and FDIC insurance, one is not necessarily better than the other as both protect you in different ways. If you have a bank account or brokerage accounts, owning both types of coverage can help give you peace of mind about the safety of your savings or investments. And neither will cost you anything. Again, though, remember that neither will protect you from investment losses. SIPC and FDIC insurance isn’t meant to make you sane if an investment doesn’t go the way you planned.

bottom line

Knowing the differences between SIPC and FDIC is helpful in managing your money and keeping it safe. The former is for broker-dealer clients who are going bankrupt. (There are similarities in purpose between the SIPC and the Pension Benefit Guarantee Corporation). The FDIC, on the other hand, is for customers of banks. The most important thing to keep in mind is the coverage limits. If you have multiple bank accounts or brokerage accounts, be aware of how much funding you have with each institution you do business with.

Investing Tips

  • consider speak to a financial advisor about the best way to maximize your account choices. Finding a financial advisor doesn’t have to be difficult. SmartAsset’s free tool matches you with up to three verified financial advisors operating in your area, and you can interview your advisor matches for free to decide which one is right for you. When you are ready to find an advisor who can help you achieve your financial goals, get started now.

  • If you want to add alternative investments such as foreign currencies or Were, note that the SIPC does not extend coverage to them as they are not considered securities. The SIPC also excludes futures contracts unless held in a margin account. So think carefully before diversifying with these investments.

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