Written by: Lauren Ferraro CFP ®, CPC, CPFA, AIF®, Senior Wealth Manager
The collapse of Silicon Valley Bank and Signature Bank earlier this year has caused customers and investors to reassess whether their assets are protected in their bank accounts, brokerage accounts, and insurance companies.
There are separate types of coverage to protect your bank accounts, brokerage accounts, annuities, and life insurance policies, each of which must follow specific guidelines and provide varying coverage or protection.
The Federal Deposit Insurance Corporation (FDIC) is a government agency that protects against the loss of account balances at FDIC-insured banks if the banks fail financially. FDIC insurance provides coverage up to $250,000, per depositor, per insured bank, for each account ownership category at a bank.
Assets in your brokerage account are protected by a different entity. The Securities Investor Protection Corporation (SIPC) is a nonprofit membership corporation that protects customers of SIPC-member broker-dealers if those firms were to fail financially. SIPC protects brokerage accounts for each customer up to $500,000 per account, if the accounts are separate entities. For example, if you have an IRA in your name and a joint account with your spouse, these would be treated as separate accounts, and each would be insured up to $500,000. Up to $250,000 of cash within a customer’s brokerage account that is not invested in securities is covered under SIPC insurance. SIPC only provides protection when firms are members and does not protect against market declines or investment losses.
Insurance and annuity policyholders are protected by the state guaranty fund. Insurance guaranty funds are state-mandated insurance programs that protect policyholders of insolvent insurance companies. These funds are typically administered by state governments, and the coverage limits and specifics vary by state. Coverage limits in Missouri and Florida are up to $250,000 and in Illinois up to $300,000. The purpose of these guaranty funds is to protect policyholders from financial loss if their insurance company fails.
Additional information and resources on these topics can be found at fdic.gov and sipc.org.
If you have any questions or concerns regarding this topic or your personal financial situation, please reach out to our team at 636.400.7889.
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