FDIC vs NCUA vs SIPC: How are my money and assets protected?

The FDIC insures money in a bank. The NCUA insures money in a credit union. The SIPC protects your investment accounts. Learn how it all happens here.

Zack Sigel

Zack Sigel

Published December 19, 2018

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When a bank fails, you could hypothetically lose the money you have deposited in your checking and savings accounts. To prevent this from happening, the U.S. government established the Federal Deposit Insurance Corporation, or FDIC. The FDIC insures the first $250,000 of the money in your accounts. That means if the economy suddenly crashes and there’s a rush of people to withdraw their cash, the FDIC will replace the whole amount up to $250,000.

The FDIC insures money in a bank. If you use a federally chartered credit union, it is insured by National Credit Union Administration, or NCUA, instead. The NCUA insures money in a credit union the same way the FDIC does, and even in the same amounts.

The FDIC and NCUA insure money in all kinds of deposit accounts. Insured accounts include not just checking and savings but also money market accounts, certificates of deposit, and financial instruments issued by the bank or credit union like cashier’s checks and money orders.

Investments, however, are not insured by either the FDIC or NCUA. The Securities Investor Protection Corporation, or SIPC, a nonprofit organization mandated by U.S. law, does protect investments. That means your securities, including annuities, stocks, bonds, and mutual funds, are protected.

Read on:

How the FDIC insures bank accounts

The FDIC was created after the Great Depression, when bank runs depleted the cash reserves of thousands of banks around the country. A bank run happens when people attempt to withdraw their money from the bank, only to find that the bank doesn’t have enough cash reserves to fulfill the request, which causes a bank to fail.

The FDIC is funded by premiums paid by the banks it insures. If your bank is FDIC-insured, it should indicate somewhere in its physical locations or on its website. You can also check if a bank is FDIC-insured by going to the FDIC’s own website.

Both brick-and-mortar banks and online banks may be FDIC-insured. The FDIC makes no distinction between these types of banks and insures the cash in eligible accounts for each type the same way.

FDIC insurance

The FDIC uses “ownership categories” to determine what types of accounts it will insure. Accounts that fall under the following ownership categories are FDIC-insured:

  • Single deposit account
  • Joint deposit account
  • Certain retirement accounts, like IRAs and 401(k) plans
  • Revocable and irrevocable trust accounts
  • Deposit accounts owned by a corporation, partnership, or association
  • Deposit accounts owned by federal, state, and local governments, including Indian tribes

The FDIC insures the first $250,000 per depositor, per FDIC-insured bank, per ownership category.

For example, if you have a checking account and savings account in a single bank, the total of both accounts is only insured up to $250,000 because those accounts are the same ownership category (single deposit account) at the same bank. But if you put your checking account in one bank and your savings account in another bank, then both accounts are insured up to $250,000, for a total of $500,000 in coverage.

As another example, if you have $100,000 in a personal bank account, $100,000 in a bank account you jointly own with your spouse, and $100,000 in a deposit account owned by a trust, then that combined $300,000 is fully insured even though it exceeds the $250,000 maximum because it’s spread across three different ownership categories.

Types of accounts insured by the FDIC

  • Checking accounts
  • Savings accounts, including money market accounts and certificates of deposit. Learn about the different types of savings accounts.
  • Cashier’s checks and money orders
  • Negotiable order of withdrawal accounts

Types of accounts not insured by the FDIC

  • U.S. government securities, including municipal and Treasury bonds
  • Mutual funds
  • Annuities
  • Life insurance policies
  • Stocks
  • Bonds

How the NCUA insures credit union accounts

The NCUA performs all the functions of the FDIC but for credit unions. Credit unions are not-for-profit financial institutions with which you can deposit and withdraw money, take out a loan, or open up a credit card account. While generally smaller in size, credit unions may offer more favorable terms (lower interest rates on loans, for example) and a more personal touch.

The trade-off is that credit unions have fewer physical locations and ATMs. Credit unions may also keep lower assets on hand, keeping them more vulnerable to bank runs. The NCUA protects credit union customers from this possibility.

You should note the “NCUA-insured” signage at your credit union or its website. The NCUA also lists which credit unions it insures.

The NCUA insures federally chartered credit unions. It does not insure state-chartered credit unions, also called private credit unions, which comprise approximately 2% of credit unions. (State-chartered credit unions may use a private credit union insurance company, such as American Share Insurance, or ASI.)

NCUA insurance

Like the FDIC, the NCUA insures $250,000 per depositor, per account ownership type, per NCUA-insured credit union. The four account ownership types recognized by the NCUA are:

  • Individual
  • Joint
  • Trust (revocable and irrevocable)
  • Retirement

If you spread your deposits among different ownership types, the first $250,000 of each of those deposits is covered by the NCUA. Likewise if you spread your deposits among different credit unions, even if they’re in the same ownership category at their respective credit union.

Types of accounts insured by the NCUA

Types of accounts not insured by the NCUA

How the SIPC insures your investments

The FDIC and NCUA do not insure investment accounts. If the economy fails, the value of your stocks, bonds, mutual funds, and annuities may decline, which is a risk you have to take with your investments.

The SIPC, a nonprofit corporation backed by the U.S. government, protects your investments. That is, if you own stock in Apple, and your brokerage fails or loses the shares because of error or malicious activity, then the SIPC will try to recover your shares. This goes for most other types of assets or securities you invest with a financial firm. The SIPC exists to return liquidated securities to their owners.

However, the SIPC doesn’t help you recoup losses caused by the market; it doesn’t provide insurance against risk. For example, if you own $1,000 worth of Apple shares, and the stock price drops to $950, that’s on you.

But if your brokerage firm liquidates your securities, the SIPC will return the value of them to you at the time they were liquidated. That means if you owned $1,000 worth of Apple shares and your financial institution goes under, then you’re entitled to receive $1,000 back even if the shares dropped to $950 at the time the SIPC opened the case.

The SIPC insures up to $500,000 worth of your securities, including $250,000 of uninvested cash you deposited with a brokerage firm with the intent of purchasing securities.

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Types of investments insured by the SIPC

The Securities Investor Protection Act of 1970, which established the SIPC, defines what types of securities are protected. These are:

  • Notes
  • Stocks, including Treasury stocks and transferable shares
  • Bonds
  • Evidence of indebtedness
  • Collateral trust certificates and voting trust certificates
  • CDs (certificates of deposit), including certificates of deposit for a security
  • Security futures, meaning a “contract of sale for future delivery of a single security or of a narrow-based security index”
  • Any investment contract or certificate of interest in any profit-sharing agreement or in any oil, gas, or mineral royalty or lease
  • Puts, calls, straddles, or privileges on any security, group or index of securities, or securities that are to be exchanged for foreign currency
  • Receipts, guarantees, or rights to purchase or sell any of the above securities or other instruments “commonly known as securities”

What the SIPC does not cover

The SIPC is not a regulatory agency, so it can’t investigate financial firms while they’re still solvent. Its authority only begins when a brokerage fails. There are also some financial instruments that don’t fall under its jurisdiction, including:

  • Currency
  • Commodities, such as metals, oil and gas, agricultural products and livestock, and carbon credits
  • Contracts to buy commodities, including futures contracts
  • Cryptocurrency, such as bitcoin, litecoin, and ether

Is my cryptocurrency insured?

No government agency or government-backed organization regulates cryptocurrencies. If you’re worried about an economic downturn destroying the value of your bitcoin, convert it to cash.

Depending on the currency exchange, cash you put in but don’t use to buy crypto may be protected by the FDIC, as the exchange may store that cash in a bank until you use it to buy crypto. The usual FDIC insurance applies ($250,000 per depositor, per bank), but be sure to confirm with the exchange that they are FDIC-insured.

Some cryptocurrency exchanges may also insure your crypto through a private insurance company. The value of the crypto is not insured; if your bitcoin decreases in value, then you have no recourse. But a good crypto exchange insurance policy should protect your currency from hacking, digital theft, and physical loss.

Note that once you withdraw your crypto from the exchange, it’s no longer protected by the exchange’s insurance policy. If it gets stolen or destroyed, it may be on you to replace it.

But check with your homeowners insurance or renters insurance company about insuring your digital assets. If your carrier’s coverage for cryptocurrency is lacking, ask your carrier for a rider to schedule your digital assets under separate coverage.

If your carrier still doesn’t offer enough coverage, ask a licensed representative at Policygenius about a homeowners or renters insurance policy that covers cryptocurrency. He or she can guide you through your various options and explain how much such a policy could cost.

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