Insurance coverage for accounts

ByEmmaPatch and Erin Bending

Kiplinger

Q: Whatprotectiondoconsumershave iftheirbank, creditunionorbrokerage fails? A: The Federal Deposit Insurance Corp (FDIC) ensures that your bank deposits are safe, even if the bank goes under. The FDIC— which is funded by premiums paid by banks and savings associations — protects up to $250,000 in individual deposit accounts and up to $250,000 for each person’s share of joint accounts.

FDIC insurance covers money in checking, savings and money market deposit accounts, certificates of deposit and official items issued by a bank, such as cashier’s checks and money orders. The coverage extends to depositors’ accounts at each insured bank, including IRAs, living trust accounts and payable-ondeath accounts.

To determine whether a bank isFDIC insured, look for the FDIC sign at the bank, go to FDIC.gov or call 877-275-3342. You can find out if your accounts are fully covered with the FDIC’s Deposit Calculator.

TheFDIC doesn’t insuremoney invested in stocks, bonds, mutual funds, life insurance policies or annuities, even if these investments are purchased at an insured bank. It also doesn’t cover safety deposit boxes or their contents.

Deposits in federal credit unions are covered by theNational CreditUnion Administration (NCUA), a federal agency set up in 1970. It operates in a similarway to FDIC, protecting up to $250,000 per credit union member (whether in an individual or a joint account) via theNational CreditUnion Share Insurance Fund.

Some credit unions are state-chartered and may be outside the federal-insurance framework. These credit unions might be covered by private insurance, but it is important to check the deposit limit and coverage before you put your hardearned deposits into one of these institutions. Find outmore information on credit unions atMyCreditUnion.gov and use the Share Estimator tool on that site to check howyour deposits might be covered in the event of a credit union failing.

The Securities Investor Protection Corp. (SIPC) is an independent body that protects investments and brokerage accounts. Brokerages are required by law to keep customers’ investments separate fromtheir own funds, but if thefirmfails and customers’ assets go missing— due to theft, fraud or unauthorized trading, for example— SIPC can replace customers’ cash and securities.

SIPC first divides up the broker’s remaining assets among investors, then uses its ownfunds— up to $500,000 per account, with a limit of $250,000 in cash — to buy the same number of shares you originally owned and replace your cash.

SIPC isn’t a government agency and has no authority to investigate fraud at brokerage firms. That’s up to Finra, the industry’s self-regulatory organization, and the Securities andExchange Commission (SEC), which refers brokerage failures to SIPC. After that, SIPC will file an application in the federal district court to notify customers.

VETREANTANAVICIUTEMESKAUSKIENE/ DREAMSTIME