The federal government provides certain legal protection for assets held by banks, credit unions and securities dealers. This information is provided as a service to Horizon Financial Services clients.
Bank Deposit Accounts and the FDIC
The Federal Deposit Insurance Corporation (FDIC) is an independent agency of the United States government that protects the funds depositors place in banks and savings associations. FDIC insurance is backed by the full faith and credit of the United States government. Since the FDIC was established in 1933, no depositor has ever lost a single penny of FDIC-insured funds.
FDIC insurance covers all deposit accounts, including checking and savings accounts, money market deposit accounts and certificates of deposit. FDIC insurance does not cover other financial products and services that banks may offer, such as stocks, bonds, mutual fund shares, life insurance policies, annuities or securities.
More information from the Federal Deposit Insurance Corporation, including account coverage limits is provided here.
Member share accounts at most credit unions are insured by the National Credit Union Share Insurance Fund (NCUSIF). It is administered by the National Credit Union Administration (NCUA), which is an independent agency of the federal government and is backed by the full faith and credit of the U.S. Treasury. (Some credit unions are not federally insured but are overseen by state regulators; they typically have private credit insurance.)
NCUSIF insurance is similar to FDIC insurance. It covers single-owner accounts up to $100,000 per customer per institution. Retirement accounts such as IRAs and Keoghs have separate coverage up to $250,000. As with bank deposit accounts, independent coverage may be available for different categories of ownership. You can estimate your existing coverage by using the calculator at the NCUA’s website.
The North Carolina Insurance Guaranty Association is a non-profit, unincorporated legal entity created by Statue to protect North Carolina insurance policyholders and claimants from severe financial losses and delays in claim payments due to the insolvency of a member property and casualty writing insurance carrier.
Visit the North Carolina Department of Insurance by clicking here.
Brokerage Accounts and SIPC
Most brokerage accounts are protected by the Securities Investor Protection Corp (SIPC). Unlike the FDIC, the SIPC is not a governmental agency but a nonprofit corporation funded by its membership, which is comprised of broker-dealers registered with the Securities and Exchange Commission. (Any broker-dealer that is not an SIPC member must disclose that fact to customers.)
SIPC was created by Congress in 1970 to help return customer property, including both securities and cash in brokerage accounts, if a broker-dealer or clearing firm experiences insolvency, unauthorized trading, or securities that are lost or missing from a customer’s securities account. Many brokerages also carry additional private insurance to extend coverage beyond the SIPC limits. Should a SIPC member firm become insolvent, SIPC would request a court to appoint a trustee to supervise transfer of customer securities and cash. For individual accounts, SIPC covers a maximum of $500,000 per customer (including up to $100,000 in cash) at a given brokerage house or clearing firm.
Visit the Securities Investment Protection Corporation by clicking here.