Key Takeaways
Direct answer: FDIC insures bank deposits up to $250,000 per depositor if the bank fails; SIPC protects brokerage securities and cash up to $500,000 per customer, including a $250,000 cash sublimit, if the brokerage firm fails or mishandles customer assets. The two cover different institution types and different failure events, and neither one replaces money lost because an investment simply declined in value.
- FDIC and NCUA insure deposits at banks and credit unions. SIPC protects securities and cash held at a failed brokerage firm.
- SIPC's $500,000 limit includes a $250,000 sublimit for cash; it is not $500,000 in securities plus a separate $500,000 in cash.
- Neither program covers a decline in the market value of an investment, only the failure or misconduct of the institution holding the assets.
- Uninvested brokerage cash swept into a partner bank account can carry FDIC insurance at that bank, separate from the SIPC protection on the securities in the same brokerage account.
FDIC vs. SIPC at a Glance
| FDIC | SIPC | |
|---|---|---|
| What it covers | Bank deposits: checking, savings, money market deposit accounts, CDs | Brokerage account securities (stocks, bonds, mutual funds) and cash held for investment |
| Standard limit | $250,000 per depositor, per bank, per ownership category | $500,000 per customer, including a $250,000 limit for cash |
| Trigger event | The bank fails | The brokerage firm fails or fails to safeguard customer assets |
| Covers market losses? | Not applicable; deposit balances do not fluctuate with the market | No, never; a security that lost value due to market conditions is not replaced |
| Backing | Full faith and credit of the U.S. government | SIPC fund plus, historically, a line of credit with the U.S. Treasury for extraordinary circumstances |
| Automatic? | Yes, for any account at an FDIC-member bank | Yes, for any account at a SIPC-member brokerage |
Credit union members should reference NCUA Share Insurance instead of FDIC; NCUA mirrors FDIC's $250,000 standard limit and government backing for credit union member shares.
What Triggers Each One
FDIC insurance activates when an FDIC-member bank itself fails and is unable to return depositors' money. The FDIC typically resolves a failed bank quickly, often arranging for another bank to assume the failed bank's deposits over a weekend so that depositors retain uninterrupted access to insured funds. The bank's failure, not any decision by the depositor, is what triggers the payout.
SIPC activates when a SIPC-member brokerage firm fails and customer securities or cash are missing from customer accounts, most often because of the firm's insolvency or its failure to properly segregate customer assets from the firm's own assets. SIPC's role in that scenario is to work with a court-appointed trustee to return customers' actual securities and cash where possible, and to use SIPC funds to cover shortfalls up to the $500,000 limit when specific securities cannot be recovered. A brokerage firm going out of business in an orderly way, with customer assets fully intact and transferred to another firm, does not require a SIPC payout at all, since nothing is actually missing.
What Neither One Covers
- Market losses. Neither FDIC nor SIPC replaces money lost because a stock, bond, or fund declined in price. Both programs address institutional failure, not investment performance.
- Money market mutual funds are SIPC-eligible as securities, not FDIC-insured. A money market fund held in a brokerage account falls under SIPC's securities protection if the brokerage fails, but it never carries FDIC insurance, since it is not a bank deposit. See Swoopr's Prime Money Market Funds guide.
- Fraud by a third party unrelated to the institution's own failure is generally addressed through separate consumer-protection frameworks, not FDIC or SIPC coverage.
- Cryptocurrency and most commodities held directly are not securities under SIPC's definition and are not covered, even at a SIPC-member brokerage.
Frequently Asked Questions
What is the difference between FDIC and SIPC?
FDIC insures bank deposits, checking, savings, money market deposit accounts, and CDs, up to $250,000 per depositor if the bank fails. SIPC protects brokerage account securities and cash, up to $500,000 per customer including a $250,000 limit for cash, if the brokerage firm fails or misappropriates customer assets. They cover different institution types and different trigger events, and a single dollar is never covered by both at the same time.
Does SIPC cover investment losses?
No. SIPC protects against the brokerage firm's failure or its misconduct in safeguarding customer assets, not against a security losing value because the market moved against it. If a stock in a brokerage account falls in price, SIPC provides no coverage for that decline; it only steps in to replace missing securities and cash when the brokerage itself fails.
Can the same account be covered by both FDIC and SIPC?
No, not for the same dollar. A bank deposit account is covered by FDIC insurance; a brokerage account holding securities is covered by SIPC. Some brokerage cash-sweep programs move uninvested cash into FDIC-insured bank accounts, in which case that swept cash is FDIC insured at the receiving bank, while securities remaining in the brokerage account are separately SIPC protected.
What is the SIPC coverage limit?
SIPC protects up to $500,000 per customer at a failed brokerage firm, which includes a $250,000 limit specifically for cash held in the account. The $500,000 figure is a combined total for securities and cash, not $500,000 in securities plus a separate $500,000 in cash.
What is excess SIPC coverage?
Some brokerage firms purchase supplemental private insurance that would apply above the statutory SIPC limits if the firm failed and customer assets were missing. It is a commercial policy bought by the firm, not a government program, so its terms, aggregate caps and insurer differ from firm to firm and can change. It addresses the same custody failure SIPC addresses rather than adding any protection against a holding falling in value.
How does the cash sublimit apply to an account holding both cash and securities?
The overall per-customer limit covers securities and cash together, with a lower sublimit applying to the cash portion specifically. An account whose value sits mostly in securities can therefore be fully within the overall limit while a large uninvested cash balance runs past the cash sublimit on its own. Cash held for investment is what the sublimit contemplates, which is one reason brokerage cash is often swept to partner banks or into a fund rather than left idle.
Does SIPC protect against unauthorized trading or fraud by a broker?
SIPC addresses missing customer property when a member firm fails, restoring securities and cash that should have been in custody. It is not a general remedy for misconduct: losses from unsuitable recommendations, unauthorized trades that were executed and settled, or investments that simply lost value fall outside it. Those disputes run through FINRA arbitration, regulatory enforcement or the courts, which is a separate track from a SIPC liquidation.
What is the difference between SIPC and FINRA?
They do different jobs. SIPC is a nonprofit corporation funded by member firms that steps in when a member fails, to return customer securities and cash from custody. FINRA is a self-regulatory organization that writes conduct rules for broker-dealers, examines them, disciplines misconduct and runs the arbitration forum for customer disputes. FINRA supervises firms while they operate; SIPC acts after one has failed.
Are futures positions in a brokerage account covered by SIPC?
Commodity futures contracts and the funds held to margin them are generally outside SIPC coverage, with only narrow exceptions where the positions are held in a portfolio margining arrangement within a securities account. Customer protection for futures runs instead through the CFTC's segregation requirements for funds held by a futures commission merchant. An account holding both stocks and futures can therefore sit under two different customer-protection regimes at once.