{"id":10676,"date":"2021-11-18T14:37:50","date_gmt":"2021-11-18T22:37:50","guid":{"rendered":"http:\/\/canary.kcprod.info/blog\/?p=10676"},"modified":"2023-10-10T15:32:45","modified_gmt":"2023-10-10T22:32:45","slug":"the-difference-between-fdic-and-sipc-insurance","status":"publish","type":"post","link":"https:\/\/canary.kcprod.info/blog\/the-difference-between-fdic-and-sipc-insurance\/","title":{"rendered":"FDIC and SIPC Insurance: What&#8217;s the Difference?"},"content":{"rendered":"\n<p>You\u2019ve probably noticed when you go to a bank there\u2019s usually a sign or placard announcing that deposits at that bank are FDIC insured. But what does FDIC insurance mean for you, and how is it different from SIPC insurance, the insurance you receive on your brokerage account? Here, we\u2019ll break down what each kind of insurance covers and why it matters.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>What is FDIC insurance?<\/strong><\/h2>\n\n\n\n<p>The Federal Deposit Insurance Corporation (FDIC for short) was founded in 1933 as an independent agency of the U.S. government. It protects the cash being held in bank accounts up to $250,000 per depositor, per FDIC-insured bank, per account category. So if your bank were to suddenly lose all your money, the FDIC would pay you as soon as possible, via either a new account at another insured bank or a check in the amount of your insured balance.&nbsp;<\/p>\n\n\n\n<p>If you have accounts at multiple FDIC-insured banks, you\u2019re covered for up to $250,000 at each bank. If you and your partner have a joint account at one bank, you\u2019re covered up to $500,000 for that account, plus $250,000 per individual account. There are, however, some exceptions: the Wealthfront Cash Account, for example, offers up to $8 million in FDIC insurance per depositor (more on that below).<\/p>\n\n\n\n<p>As a rule, FDIC insurance covers things like:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Checking accounts<\/li>\n\n\n\n<li>Savings accounts<\/li>\n\n\n\n<li>Money market deposit accounts<\/li>\n\n\n\n<li>Certificates of deposit<\/li>\n<\/ul>\n\n\n\n<p>However, FDIC insurance does <em>not<\/em> cover the following:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Stocks<\/li>\n\n\n\n<li>Bonds<\/li>\n\n\n\n<li>Mutual funds<\/li>\n\n\n\n<li>Annuities&nbsp;<\/li>\n\n\n\n<li>Life insurance policies<\/li>\n\n\n\n<li>Safe deposit boxes<\/li>\n<\/ul>\n\n\n\n<p>You can see <a href=\"https:\/\/www.fdic.gov\/resources\/deposit-insurance\/brochures\/insured-deposits\/\">a full list of everything covered by FDIC insurance here<\/a>.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">What is SIPC insurance?<\/h2>\n\n\n\n<p>The Securities Investor Protection Corporation (SIPC), on the other hand, is a non-profit membership corporation that provides insurance that protects the assets in your brokerage accounts. This coverage is limited to $500,000 in total value per customer, of which $250,000 can be cash (either from selling securities or for buying them).<\/p>\n\n\n\n<p>&nbsp;Covered assets include:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Stocks&nbsp;<\/li>\n\n\n\n<li>Bonds<\/li>\n\n\n\n<li>Treasury securities<\/li>\n\n\n\n<li>Certificates of deposit (those issued by a broker, not a bank)&nbsp;<\/li>\n\n\n\n<li>Mutual funds&nbsp;<\/li>\n\n\n\n<li>Money market mutual funds<\/li>\n<\/ul>\n\n\n\n<p>However, this protection only applies to SIPC-insured brokerages that are in financial trouble. It does not protect against decreases in the value of your investments due to market fluctuations or bad investment advice. But if your investment firm goes belly-up and doesn\u2019t move your assets to another protected firm, SIPC will have your back up to the insured limits.&nbsp;<\/p>\n\n\n\n<p>SIPC does not cover the following kinds of investments:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Commodities futures contracts<\/li>\n\n\n\n<li>Foreign exchange trades<\/li>\n\n\n\n<li>Non SEC-registered investment contracts and fixed annuity contracts<\/li>\n<\/ul>\n\n\n\n<p>Some investors might feel nervous if their account value exceeds $500,000 because they\u2019re only insured up to that amount. We don\u2019t think you should worry. As we\u2019ve written before, <a href=\"https:\/\/canary.kcprod.info/blog\/false-comfort-of-sipc-insurance\/\">it\u2019s very rare for SIPC insurance to come into play<\/a>. Because of the financial safeguards required by regulators (including a requirement to keep investors\u2019 securities separate from the brokerage\u2019s assets), it\u2019s highly unusual for an investor to lose their securities or cash when a brokerage goes out of business. It\u2019s only in situations when assets are missing that SIPC has to step in to oversee the liquidation of the firm. For perspective, <a href=\"https:\/\/www.sipc.org\/media\/sipc-50th-report.pdf\">SIPC only had two new cases between 2014 and 2020<\/a> where they had to get involved because client assets were not fully available.<\/p>\n\n\n\n<p>You can see a <a href=\"https:\/\/www.sipc.org\/for-investors\/what-sipc-protects\">full list of everything covered by SIPC insurance here<\/a>.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>SIPC vs. FDIC: Deciding which is right for you<\/strong><\/h2>\n\n\n\n<p>When thinking about SIPC and FDIC insurance, you want to make sure you have the right kind of insurance for the right account. Both are important. It\u2019s wise to seek out FDIC-insured accounts for your cash, <em>and<\/em> to make sure your brokerage account has SIPC insurance. That way, you\u2019re covered in case your bank or your brokerage experiences financial trouble.<\/p>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"863\" height=\"530\" src=\"https:\/\/canary.kcprod.info/blog\/wp-content\/uploads\/2019\/07\/Screen-Shot-2021-11-18-at-10.19.08-AM-863x530.png\" alt=\"\" class=\"wp-image-14826\" srcset=\"https:\/\/canary.kcprod.info/blog\/wp-content\/uploads\/2019\/07\/Screen-Shot-2021-11-18-at-10.19.08-AM-863x530.png 863w, https:\/\/canary.kcprod.info/blog\/wp-content\/uploads\/2019\/07\/Screen-Shot-2021-11-18-at-10.19.08-AM-640x393.png 640w, https:\/\/canary.kcprod.info/blog\/wp-content\/uploads\/2019\/07\/Screen-Shot-2021-11-18-at-10.19.08-AM-768x472.png 768w, https:\/\/canary.kcprod.info/blog\/wp-content\/uploads\/2019\/07\/Screen-Shot-2021-11-18-at-10.19.08-AM.png 1022w\" sizes=\"auto, (max-width: 863px) 100vw, 863px\" \/><\/figure>\n<\/div>\n\n\n<h2 class=\"wp-block-heading\">Does Wealthfront have FDIC or SIPC insurance?<\/h2>\n\n\n\n<p>We have both. Investments in your Wealthfront Investment Account are SIPC insured, and the Wealthfront Cash Account comes with up to $8 million in FDIC insurance <meta charset=\"utf-8\"><\/meta>\u2014 32 times the coverage offered by traditional banks. We are able to offer $8 million of FDIC insurance by sweeping your money into up to 32 banks that are protected by the FDIC. Because we use multiple banks, we can provide more insurance than the $250,000 offered at single banks. Don\u2019t worry: this doesn\u2019t mean your cash gets held up in transit when you try to move it around. You can easily access your cash whenever you need it, either for a big purchase or an investment. You can even see which banks are holding your funds on your monthly statement.\u00a0<\/p>\n\n\n\n<p>We hope this information gives you some peace of mind and empowers you to bank and invest with institutions with the right kinds of insurance. Odds are you won\u2019t need it, but it\u2019s still nice to know you\u2019re covered in the event of an emergency.&nbsp;<\/p>\n\n\n\n<p><\/p>\n","protected":false},"excerpt":{"rendered":"<p>You\u2019ve probably noticed when you go to a bank there\u2019s usually a sign or placard announcing that deposits at that bank are FDIC insured. But what does FDIC insurance mean for you, and how is it different from SIPC insurance, the insurance you receive on your brokerage account? Here, we\u2019ll break down what each kind [&hellip;]<\/p>\n","protected":false},"author":129,"featured_media":14831,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"footnotes":""},"categories":[2390],"tags":[2374,2391,1777,1467,2392],"coauthors":[82],"class_list":["post-10676","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-saving","tag-banks","tag-fdic","tag-insurance","tag-savings-account","tag-sipc"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v24.3 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>FDIC vs. SIPC Insurance: What You Need To Know | Wealthfront<\/title>\n<meta name=\"description\" content=\"FDIC and SIPC insurance are both important, and they cover different things. 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