What is FDIC insured?

The FDIC is an independent agency of the federal government created in 1933 in response to the thousands of bank failures that occurred in the 1920's and early 1930's. The Federal Deposit Insurance Corporation (FDIC) preserves and promotes public confidence in the U.S. financial system by insuring deposits in banks and thrift institutions

The FDIC insures deposits only. It does not insure securities, mutual funds or similar types of investments that banks and thrift institutions may offer; nor does it insure funds in any institutions that do not fit the definition of a bank or thrift institution as defined in the original statute. Financial institutions such as brokerage firms or investment banks do not meet the statautory definition of a bank or thrift.

The FDIC is funded by premiums that banks and thrift institutions pay for deposit insurance coverage and from earnings on investments in U.S. Treasury securities.

Savings, checking and other deposit accounts, when combined, are generally insured to $100,000 per depositor in each bank or thrift the FDIC insures. Deposits held in different
categories of ownership â€“ such as single or joint accounts â€“ may be separately insured. Also, the FDIC generally provides separate coverage for retirement accounts, such as individual retirement accounts (IRAs) and Keoghs, insured up to $250,000.

SIPC (referred to as sip-ick), the Securities Investor Protection Corporation, on the other hand, is is a non-profit corp establish to protect brokerage accounts in the event of the financial collapse the the brokerage firm. SIPC will either act as trustee or work with an independent court-appointed trustee in a missing asset case to recover funds. The statute that created SIPC provides that customers of a failed brokerage firm receive all non-negotiable securities that are already registered in their names or in the process of being registered. All other so-called "street name" securities are
distributed on a pro rata basis. At the same time, funds from the SIPC reserve are available to satisfy the remaining claims of each customer up to a maximum of $500,000. This figure includes a maximum of $100,000 on claims for cash. Recovered funds are used to pay investors whose claims exceed SIPC's protection limit of $500,000. SIPC often draws down its reserve to aid investors. Created by the Securities Investor Protection Act, SIPC, unlike the FDIC is neither a government agency nor a regulatory authority. It is a nonprofit, membership corporation, funded by its member securities broker-dealers.

SIPC does not insure against losses from bad or fraudulent investments (i.e. Enron, MCI, etc.).

If someone is trying to get you to subscribe or pay for some sort of insurance for an account be very wary; both FDIC and SIPC are automatic on retail (public customer) accounts.