SIPC vs FDIC | What is the Difference? (EXPLAINED)

What is the difference between the SIPC and the FDIC? Although mutually exclusive, the FDIC and SIPC are very important to understand and make sure you are covered by them. In this video I explain the brief history of each insurance, as well as how they differ from each other in many ways! I also take the time to talk about what happens when the FDIC or SIPC insurance is needed!! I hope you enjoy!

Similarities:
1. You do not have to sign up for either FDIC or SIPC insurance. It is automatically started once you open an account at a member firm.
2. If you are doing business with a firm and they aren’t FDIC or SIPC insured, GET A NEW ONE!

Differences:

FDIC (Federal Deposit Insurance Corporation)
Protects your assets in a bank account (checking or savings or money market deposit accounts or CDs)

HISTORY of the FDIC
-Due to stock market crash of 1929, more than 9,000 banks had failed by march of 1933. Started out as $2,500 in coverage in 1934, but now is at $250,000 as of 2008

*Insures deposits in the amount of $250,000 per depositor per insured bank*

What is INSURED?
1. All types of savings and checking deposits
2. All types of checks
3. Certified checks, letters of credit and travelers checks

What is NOT INSURED?
1. Investments in stocks, bonds, mutual funds, municipal bonds or other securities, annuities, life insurance products, EVEN IF PURCHASED AT AN INSURED BANK, T bills, safe deposit boxes, losses by theft (although stolen funds may be covered by the banks hazard and casualty insurance)

IF done right, the FDIC website says “Since 1933, no depositor has lost a penny of FDIC-insured funds

SIPC (Securities Investors Protection Corporation)
Protects your assets in a brokerage account. (stocks, bonds, treasury securities, CDs (issued by a broker, not a bank), mutual funds, money market mutual funds (different than money market deposit accounts)

HISTORY
-Started in 1970 after the previous few years experienced hundreds of broker-dealers merging, getting acquired, or simply failing. Some were unable to meet their obligations to customers and went bankrupt. This created a huge decline in public confidence in US securities. Started out as $50,000 in coverage for investments and $20,000 for cash holdings. NOW at $500,000 for investments with up to $250,000 for cash

What is INSURED?
Stocks, bonds, treasury securities, CDs (issued by a broker, not a bank), mutual funds, money market mutual funds - different thank money market deposit accounts

What is NOT INSURED ?
Investment losses or worthless stock (SIPC will replace your shares, not dollar values. So if you own 500 shares of General Electric worth $15,000 and your brokerage firm fails, SIPC will replace your 500 shares, but only at the current value.) Losses due to account hacking, unless the firm was forced into liquidation due to the hack. Claims against bad or inappropriate investment advice, which is handled by FINRA and SEC. Investments in commodity futures, (oil, gold, wheat), fixed annuities, currency, hedge funds or investment contracts not registered with the SEC.

If done right, the SIPC has returned investments to 99% of the investors eligible for its protection!!

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DISCLAIMER: Kolin Hayes, including but not limited to any guests appearing in his videos, are not financial/investment advisors, brokers, or dealers. They are solely sharing their personal experience and opinions; therefore, all strategies, tips, suggestions, and recommendations shared are solely for entertainment purposes. There are financial risks associated with investing, and Kolin Hayes's results are not typical; therefore, do not act or refrain from acting based on any information conveyed in this video, webpage, and/or external hyperlinks. For investment advice please seek the counsel of a financial/investment advisor(s); and conduct your own due diligence.

Affiliate Links Disclosure: Some of the links on this webpage are affiliate links, meaning, at no additional cost to you, Kolin may earn a commission if you click through and make a purchase and/or subscribe. However, this does not impact Kolin's opinions and comparisons.

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