Brokerage Account Insurance Limits
The majority of brokerage firms registered with the Securities and Exchange Commission are members of the Securities Investor Protection Corporation. The SIPC, a member-operated organization, insures funds and securities held in brokerage accounts at member firms. Brokerage accounts held at non-SIPC members are not insured. All member firms must prominently display SIPC signage at all branch locations and offices.
Other People Are Reading
-
What SIPC Covers
-
Securities are subject to daily price fluctuations and the SIPC insurance coverage does not protect you from losses incurred due to your investment holdings losing value. The SIPC only covers losses stemming from the brokerage firm that holds your accounts becoming insolvent. The SIPC insures brokerage accounts up to $500,000 per person but only insures cash held in the account up to $250,000 per person. The SIPC covers securities such as stocks, bonds, variable annuities and mutual funds. The SIPC does not cover securities not registered with the SEC, including commodities such as gold.
SIPC Process
-
The SIPC petitions a court to appoint a trustee who must oversee the administration of an insolvent brokerage firm. The trustee contacts brokerage customers and anyone who had assets at the failed firm can file a claim form to the SIPC. The SIPC can either directly replace lost securities or reimburse claimants with a sum of money equal to the market value of the securities as recorded on the day that the court appointed the trustee. Therefore, depending on how your holdings performed you may get back more or less than the securities were worth when the firm actually went bankrupt.
-
Annuities
-
Fixed annuities are among the securities not covered by SIPC insurance since fixed annuities are insurance contracts that are regulated at the state level. However, fixed annuities that you hold in your brokerage account are insured by your state's insurance guarantee fund. Each state fund provides at least $100,000 of insurance coverage on annuities. However, this insurance covers you in the event that your insurer goes bankrupt as opposed to your brokerage firm.
Other Insurance
-
You can buy marketable certificates of deposit from banks and hold these CDs in your brokerage account. If the bank that sold the CD goes bankrupt, the Federal Deposit Insurance Corporation insures CDs, even those in a brokerage account, up to $250,000 per account holder.
Municipal bonds are debt securities issued by states and local governments that you typically hold in a brokerage account. Some bonds are insured by private insurance firms in the event that the bond issuer goes bankrupt.
-
