FDIC vs NCUA vs SIPC (What's the Difference?)

What you'll learn:

FDIC vs NCUA vs SIPC

Protecting your hard-earned savings is a priority, and having the right insurance can provide that safety net.

The FDIC, NCUA, and SIPC are key players in safeguarding your financial assets. But how much do they actually cover? Let’s delve into the specifics.

FDIC (For Bank Deposits)

The Federal Deposit Insurance Corporation (FDIC) has been ensuring the safety of bank deposits since the Great Depression.

It’s a comforting assurance that even if your bank were to falter, your deposits remain secure. FDIC protection extends to $250,000 for individual deposit accounts and the same for each person’s share of joint accounts.

This insurance covers various accounts like checking, traditional and high-yield savings, money market deposit accounts, CDs, and official items issued by a bank such as cashier’s checks and money orders.

Your deposits in IRAs, living trust accounts, and payable-on-death accounts are also included under this protection.

However, it’s important to note that FDIC insurance doesn’t extend to investments in stocks, bonds, mutual funds, life insurance policies, or annuities, even if these are bought through an insured bank. Safety deposit boxes and their contents also fall outside the scope of FDIC coverage.

NCUA (For Credit Union Deposits)

For those utilizing federal credit unions, the National Credit Union Administration (NCUA) provides similar protection. Established in 1970, it covers up to $250,000 per credit union member, regardless of whether the account is individual or joint.

While most federal credit unions fall under the NCUA, some state-chartered credit unions might have different insurance frameworks. It’s crucial to verify the coverage and deposit limits before entrusting your savings to these institutions.

Tools like the Share Estimator on MyCreditUnion.gov can help assess how your deposits would be safeguarded in the event of a credit union failure.

SIPC (For Investment Accounts)

The Securities Investor Protection Corporation (SIPC) plays a crucial role in safeguarding investments and brokerage accounts.

In case of a brokerage firm’s failure, SIPC oversees the liquidation of assets to recover customers’ missing assets, cash, and securities.

SIPC ensures up to $500,000 per account, with a cash limit of $250,000. It steps in to buy the same number of shares originally owned by customers and replace the missing cash.

However, it’s important to know that SIPC intervenes only when all other options are exhausted and doesn’t have jurisdiction to investigate fraud at brokerage firms.

FDIC, NCUA, SIPC Limits

Each insurance entity has specific coverage limits and account categories it protects:

FDIC Insurance Limit: $250,000 per depositor, per bank, covering various account types.
NCUA Insurance Limit: $250,000 per depositor, per credit union account, safeguarding similar account types.
SIPC Insurance Limit: Guarantees up to $500,000 per brokerage account, covering stocks, bonds, mutual funds, and cash.

In the unfortunate event of a bank, credit union, or brokerage firm failure, these entities handle the reimbursement process.

If your financial institution faces such circumstances, rest assured that you’ll be contacted with information on how your insured funds will be returned.

Understanding the scope of FDIC, NCUA, and SIPC coverage is crucial for safeguarding your financial future. It ensures that your hard-earned savings remain protected, offering peace of mind amidst uncertain times.

This Is How FDIC, NCUA, and SIPC Protect Your Money