Investment accounts are not FDIC insured. Federal deposit insurance applies only to bank deposit products like checking accounts, savings accounts, and CDs, up to $250,000 per depositor, per bank, per ownership category.1FDIC.gov. Understanding Deposit Insurance Stocks, bonds, mutual funds, and other securities held in a brokerage account fall under a separate program run by the Securities Investor Protection Corporation, which covers up to $500,000 per customer if the brokerage firm fails, and protects only the custody of your assets, not their market value.2SIPC. What SIPC Protects
That distinction matters because many banks and brokerages are affiliated, sometimes under the same brand, and it’s easy to assume one umbrella covers everything sitting on the same statement. It doesn’t.
What FDIC Insurance Actually Covers
The FDIC insures deposits at participating banks and savings associations under the Federal Deposit Insurance Act.3Office of the Law Revision Counsel. 12 USC 1811 – Federal Deposit Insurance Corporation Federal law defines a “deposit” to include money credited to checking, savings, time, or thrift accounts, along with certificates of deposit.4Office of the Law Revision Counsel. 12 US Code 1813 – Definitions In practice, that means:
- Checking and savings accounts
- Certificates of deposit (CDs)
- Money market deposit accounts offered by a bank (not money market mutual funds)
- Cashier’s checks and money orders issued by the bank
FDIC coverage triggers only when the bank itself fails. The insurance fund reimburses depositors so a single bank’s collapse doesn’t wipe out your cash. Nothing about investment performance is part of the promise.
How Investment Accounts Are Protected Instead
When you hold securities through a brokerage firm, protection comes from the Securities Investor Protection Corporation, a nonprofit membership corporation Congress created under the Securities Investor Protection Act.5SIPC. What Is SIPC? If a SIPC-member firm enters liquidation, SIPC works to return the securities and cash held in your account, typically by transferring your holdings to another solvent broker.
Read carefully what that covers and what it doesn’t. SIPC protects the custody of your assets. If your broker goes bankrupt and your shares are missing or misappropriated, SIPC steps in to recover them. If your portfolio drops 40% in a market downturn, SIPC pays nothing. It also does not cover bad advice, unsuitable recommendations, or promises of guaranteed returns from your broker.2SIPC. What SIPC Protects
SIPC may cover unauthorized trades made without your consent, but only if the firm itself fails. Send a written complaint to the firm as soon as you spot any unauthorized activity, because that written record is typically the only proof accepted later.6Investor.gov. Securities Investor Protection Corporation (SIPC)
SIPC Limits
SIPC protection caps at $500,000 per customer, with a $250,000 sublimit for cash claims within that total.7GovInfo. 15 USC 78fff-3 – SIPC Advances If you hold $400,000 in securities and $100,000 in cash when your broker fails, the full $500,000 is covered. If you hold $200,000 in securities and $300,000 in cash, only $250,000 of the cash counts, and your total recovery is $450,000.
Accounts held in different capacities at the same brokerage, such as an individual account and a joint account, may qualify for separate coverage.8SIPC. Investors with Multiple Accounts
Excess SIPC Coverage
Many large brokerage firms buy private insurance that extends protection past the $500,000 SIPC limit. Fidelity, for instance, offers excess coverage with no per-customer dollar limit on securities and up to $1.9 million for cash awaiting investment, backed by a $1 billion aggregate policy.9Fidelity. What Is SIPC Coverage and How Does It Work? Other major firms carry similar policies with varying limits. Excess SIPC works the same way as standard SIPC. It covers missing assets if the firm fails, not investment losses.
The One Way FDIC Reaches Into a Brokerage Account
Uninvested cash sitting in a brokerage account is a special case. Many firms automatically move that cash into deposit accounts at one or more FDIC-insured banks through a bank sweep program. Once the cash reaches those banks, it receives FDIC insurance up to $250,000 per customer at each participating bank. Firms that spread the cash across several banks can extend total FDIC coverage well beyond $250,000.10Investor.gov. Cash Sweep Programs for Uninvested Cash in Your Investment Accounts
Not every sweep works that way. Some firms sweep uninvested cash into money market mutual funds, which are investments and carry no FDIC coverage. Check your brokerage account agreement to see how yours handles idle cash.
Investment Products With No FDIC and No SIPC Safety Net
Several products commonly sold alongside insured accounts fall outside both programs. Knowing where the gaps are is more useful than knowing where the coverage runs.
Any Loss From Market Movement
Neither the FDIC nor SIPC reimburses you for declines in the value of your investments. That loss is yours. SIPC protects only against the firm failing to return your assets, never against those assets being worth less than you paid.2SIPC. What SIPC Protects
Money Market Funds Versus Money Market Deposit Accounts
These sound alike and behave differently. A money market deposit account is a bank product covered by FDIC insurance. A money market mutual fund is an investment offered by brokerages and fund companies, and it is not FDIC insured even if it offers check-writing privileges that feel bank-like.11Consumer Financial Protection Bureau. What Is a Money Market Account? Held at a SIPC-member brokerage, a money market fund gets SIPC custody protection but no protection against loss of value.
Annuities and Insurance Products
Annuities are contracts with insurance companies, not bank deposits or securities, and they are explicitly excluded from both FDIC and SIPC coverage.12FDIC.gov. Financial Products That Are Not Insured by the FDIC If the insurer becomes insolvent, protection comes from your state’s life and health insurance guaranty association. Every state has one, and coverage limits typically range from $100,000 to $500,000, with $250,000 being the most common level.
Cryptocurrency, Precious Metals, and Commodities
Digital assets do not meet the legal definition of a “deposit” or a “security” under the statutes governing FDIC and SIPC. Physical precious metals are also excluded from SIPC because they are not registered securities.12FDIC.gov. Financial Products That Are Not Insured by the FDIC If the exchange or custodian holding these assets fails, no federal insurance backstops you.
Bond Defaults
Municipal bonds are securities, so SIPC protects them if your brokerage fails and cannot return them.13SIPC. Resources – FAQs No federal program protects against the issuer itself defaulting. If a city or county stops paying interest, investors absorb the loss regardless of where the bond is held.
How to Verify Your Coverage
Before you assume anything is protected, confirm the institution actually participates.
- For bank deposits, use the FDIC’s BankFind tool at banks.data.fdic.gov to search for your bank by name.14FDIC. Find Insured Banks – BankFind Suite
- For brokerage accounts, search the SIPC member directory at sipc.org. All registered broker-dealers are required to be members by law, with limited exceptions.15SIPC. List of Members
If your brokerage uses a bank sweep program, the account disclosures should list the FDIC-insured banks that participate. Those names matter because FDIC coverage applies separately at each one, and if you already have deposits at any of those same banks, your combined balance counts against the single $250,000 limit there.