Understanding SIPC and FDIC coverage RSS

July 1, 2012

This article provides some basic information on Federal Deposit Insurance Corporation (FDIC) insurance for bank deposits and Securities Investor Protection Corporation (SIPC) coverage for assets held in brokerage accounts, and contains links to websites that provide more detailed information.

FDIC insurance and SIPC coverage protect bank and brokerage firm customers against the risk of failing financial institutions. They do not protect consumers against market losses. Individual assets may be covered under either SIPC or FDIC, but not both.

FDIC insurance

FDIC insurance covers deposits in FDIC-insured federal banking institutions, generally banks and savings associations.  FDIC insurance was permanently increased to $250,000 per depositor in qualified and non-qualified accounts by the Financial Services Reform law of 2010.

Your deposits may be insured above the $250,000 maximum if you own other accounts in a different ownership capacity (e.g. joint accounts). The FDIC insures deposits based on account ownership status. So it is possible to have deposits in multiple accounts that add up to more than $250,000 in the same ownership at the same bank and still be fully insured.

Example of single account holder: If you have $250,000 deposited in your name in an FDIC-insured bank, you are fully covered if the institution fails. If you have $300,000 deposited in that bank, or if you have more than one account in your name at the same bank where the deposits add up to more than $250,000, you are covered only up to $250,000. In other words, all accounts in the name of the same person at the same insured bank are added together, and the total amount insured is $250,000.

Example of joint accounts: A husband and wife can have up to $500,000 on deposit in one or more joint accounts at the same insured bank and the deposits would be fully insured. The husband's share of the joint account is insured up to $250,000 and the wife's share is insured up to $250,000. If the couple has more than $500,000 deposited in one or more joint accounts, they are covered only up to $250,000 per owner for these joint accounts.

Example of multiple ownership type accounts: A husband has a single account with $250,000 at an FDIC-insured bank. His wife has a single account with $250,000 and the couple also has a joint account, with $500,000 in the same bank. In this scenario, all of the deposits are covered: the husband and wife are both fully insured in their single accounts, and the joint account is separately covered up to $250,000 each.

Retirement accounts, sometimes called qualified accounts, are also covered by FDIC insurance when the assets are deposited at an FDIC-insured bank. All retirement accounts such as IRAs, SIMPLEs, SEPs and Keogh accounts owned by the same person in the same FDIC-insured institution are added together, and the total is insured up to $250,000.

Multi-bank Deposit Programs Certain types of accounts, such as the Ameriprise® Insured Money Market Account (AIMMA) multi-bank sweep program available to client s of Ameriprise Financial Services, Inc., are able to provide depositors with additional FDIC coverage because assets are deposited in several different banks. Each AIMMA participant bank is insured by the FDIC, and each depositor’s account is insured up to the maximum of $250,000 at each bank. Because there are a total of at least ten participant banks in the AIMMA program, we are able to provide clients with up to $2.5 million in FDIC coverage in single-owner accounts.  Joint accounts can have up to $5 million in FDIC-insured cash and retirement account holders can have up to $2.5 million in FDIC-insured cash.1

SIPC coverage

SIPC coverage provides protection to customers who hold cash and securities such as stocks, bonds or mutual funds in an account at eligible brokerage firms in the event the brokerage firm fails. SIPC does not cover losses due to a decline in value of securities or cash. SIPC coverage applies if the firm fails and customer assets are lost or misappropriated by the firm (e.g., can’t be transferred to another brokerage firm).

Generally, SIPC covers up to $500,000 per individual per brokerage firm, up to $250,000 of which can be in cash.

SIPC coverage is extended to each 'legal customer.' For instance, if you have three accounts at a firm—an individually held account in your name only, a joint account with your spouse, and an IRA in your name—each account is considered a separate 'legal customer,' and each will be eligible for $500,000 in SIPC coverage.

American Enterprise Investment Services, Inc., an affiliated broker of Ameriprise Financial that holds customer funds and securities, has obtained supplemental SIPC insurance to cover claims in excess of the base SIPC levels of coverage. The excess coverage provides additional $24.5 million in securities coverage per client, with a policy maximum of $100 million.

Neither FDIC nor SIPC coverage is provided for customers who have:

  • Mutual funds held directly with the mutual fund company (not in a brokerage account)
  • Annuity and insurance contracts held with the insurer
  • Any assets held with non-FDIC or non-SIPC member institutions

Please refer to the SIPC and FDIC websites for more detailed information on their coverage.

1 As noted above, FDIC insurance is limited to a total of $250,000 per depositor, per bank. Deposits at an AIMMA participant bank are added to other deposits you may have in the same capacity at the same bank. You are responsible for monitoring the total amount of cash you may have at any particular bank. If you have an existing deposit relationship with an AIMMA participant bank, you may "opt out" of having any funds deposited at that bank through the AIMMA.

Ameriprise Insured Money Market Account (AIMMA) is an FDIC-insured product offered by Ameriprise Financial Services, Inc. and held in an omnibus account(s) at one or more FDIC-member banks (collectively, the "Program Banks"). The Program Banks may serve individually as custodians for all or a portion of the assets held within your AIMMA, as described in the "Ameriprise® Insured Money Market Account" section of the "Other Important Brokerage Disclosures" document. To view this information you can visit our website at ameriprise.com/customer-service/disclosures.asp and access "Other Important Brokerage Disclosures (40269) "or call our service line at 800.297.7378 to obtain a copy.

The FDIC website at www.fdic.gov allows you to determine the amount of your deposits which are insured. For more information, please contact the FDIC directly at 877.ASK.FDIC (877.275.3342). Any other deposits you may make to a participating program bank outside of AIMMA will be combined for purposes of determining the level of FDIC coverage per depositor at that specific bank. You are responsible for monitoring the total amount of funds they hold at each Bank in order to insure that your total deposits are within FDIC guidelines and fully insured.

Deposits in AIMMA are FDIC Insured up to $2.5 million per individual investor (up to $5 million for join accounts). Deposit products are not covered by the Securities Investor Protection Corporation (SIPC).