Protection for Bank Accounts, Brokerage Firms, Annuities and Insurance Policies: A Summary

I’ve written several posts on the asset protection limits available to consumers who have invested in a variety of financial assets. With all the changes and adjustments that have taken place in the last few months in the financial landscape, I thought it might be helpful to provide a single article summarizing the insurance /protections currently available to investors.

Some protections are temporary for now, while others appear to be permanent.  I expect there will be future modifications of federal protections if there are changes in the condition of the financial markets, for good or ill.

Money Market Accounts
The Treasury is providing a backstop for cash held in money market funds, but only if the money was in a participating fund prior to September 19 of this year. Most major mutual fund families are participating in the Treasury’s program, but you should check your fund provider to be sure. The program insures participating money market funds against loss of principal, i.e. they are insured against their share prices dropping below $1.00.  Coverage is in place until mid December of this year, but may be extended. Additional information is available at the article,
How Can I Tell If My Money Market Fund Is Safe?
Addendum 3-5-09: The current termination date for the money market fund guaranty program is April 30, 2009. The Secretary of the Treasury may extend the program to September 18, 2009.
Addendum 3-31-09: The Treasury Department announced that it is extending the money market fund guaranty program to September 18, 2009.

Funds Insured by the FDIC
These include bank certificates of deposit, bank money market accounts, checking and savings accounts and other accounts held. Until the end of 2009, FDIC insurance limits for these accounts have been raised to $250,000 per depositor per institution. It’s possible to have significantly more total coverage than this through the use of multiple accounts at the same bank.  The FDIC provides a useful insurance limit calculator.  Detailed information on this topic and related links are available with the article,
How Much FDIC Insurance Can I Have at One Bank?

Funds in a Credit Union
Accounts held in a Federal Credit Union now receive $250,000 of insurance protection per depositor. The http://www.ncua.gov/indexdata1.html” title=”National Credit Union Administration provides a site where you can confirm that your credit union is insured”>National Credit Union Administration provides a site where you can confirm that your credit union is insured.  There is also a calculator for determining your total credit union account insurance coverage.

Brokerage Accounts
Funds held in brokerage accounts are generally protected by the Securities Investor Protection Corporation (SIPC). This insurance replaces a $500,000 in missing assets if your brokerage firm fails; up to $100,000 of this can be in cash. There is special limits involved and mutual funds are covered only if held in brokerage accounts. More details and links are available in the article,
Are Your Investments Insured?

Insurance Contracts and Annuities
If an insurance company fails, policyholders have priority over the company’s other creditors. In addition, most states maintain guaranty funds to ensure policyholders against losses. Typically, state guaranty funds cover shortfalls of up to $300,000 in life insurance benefits, $100,000 in cash surrender or withdrawal values, $100,000 in withdrawal and cash values for annuities, and $100,000 in health insurance policy benefits.  For details and links, see the post,
What Happens To Your Insurance Policy When the Insurer Fails?

We can only hope that no more financial shoes will drop, and that the protections currently in place will be enough to keep investors from adding to the destabilization of the markets.

About the author

Thomas Fisher, CFP®
Thomas Fisher, CFP®

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