FDIC vs. SIPC insurance: Understanding the differences
It's important to know how your money is protected against risk. Below you'll find helpful information on insurance, including which types of products have coverage.
What's FDIC insurance?
The Federal Deposit Insurance Corporation (FDIC) is a government agency that protects consumers against the loss of account balances at FDIC-insured banks and saving associations if those institutions were to fail financially. Deposits are covered for up to $250,000 per depositor, per insured bank, for each account ownership category at a bank, in accordance with FDIC rules. All deposits an account holder has in the same ownership category at the same bank are added together and insured up to $250,000. Since Vanguard Brokerage isn't a bank, FDIC insurance applies only to certain products held at banks.
What's SIPC insurance?
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 of each customer up to $500,000, including up to $250,000 for cash. SIPC insurance doesn't cover losses related to decline in market value.
What are the key differences between the two?
|What it covers||Money in deposit accounts at FDIC-insured banks and saving associations||Securities and cash held in brokerage accounts that are SIPC-insured|
|Limit||$250,000 per depositor, per bank, per account ownership category||$500,000 (including $250,000 for cash)|
|When it applies||When a bank fails||When a brokerage firm fails|
|For more information||Visit fdic.gov||Visit sipc.org|
What types of assets in a Vanguard Brokerage Account are covered by the FDIC?
If you hold a brokered CD (certificate of deposit) in your Vanguard Brokerage Account, you'll be FDIC-insured on that CD. If you chose the Vanguard Cash Deposit for the settlement fund in your Vanguard Brokerage Account, funds held in that settlement fund will be eligible for FDIC coverage, subject to applicable limits.
- Brokered CDs, offered by FDIC-insured institutions, are eligible for FDIC insurance and can be held in a Vanguard Brokerage Account. You're responsible for monitoring the total assets you hold at each bank for FDIC coverage and limitations.
- Vanguard Cash Deposit is a bank sweep option for your settlement fund within your Vanguard Brokerage Account. Eligible balances are swept to program banks and are eligible for FDIC insurance for up to $1.25 million for individual accounts and $2.5 million for joint accounts.*
- The Vanguard Cash Plus Account is an alternative to a traditional savings account. It offers a bank sweep program whereby eligible balances are swept to program banks and are eligible for FDIC insurance for up to $1.25 million for individual accounts and $2.5 million for joint accounts.*
What types of Vanguard Brokerage investments are covered by the SIPC?
Securities in your brokerage account are held in custody by Vanguard Brokerage, a division of Vanguard Marketing Corporation (VMC). VMC is a member of SIPC, which protects securities customers of its members up to $500,000 (including $250,000 for claims for cash). An explanatory brochure is available upon request or at sipc.org.
Is there a difference in coverage between Vanguard mutual fund-only accounts and Vanguard Brokerage Accounts?
Yes. Securities held in Vanguard Brokerage Accounts are eligible for SIPC coverage. If your account number has 8 digits, you have a brokerage account. If your account has an 11-digit account number, it's a mutual fund-only account, which exists on our old platform and isn't covered by the SIPC. Transition your account to our brokerage platform to get SIPC coverage.
*Bank Sweep program balances are held at one or more Program Banks, earn a variable rate of interest, and are not covered by SIPC. See the list of participating Program Banks (PDF). Bank Sweep deposits are covered by FDIC insurance up to $250,000 per insurable category of ownership at each Program Bank, when aggregated with all other deposits held by you at such bank and in the same insurable category. Vanguard Brokerage Services® (VBS) will aggregate and allocate Bank Sweep deposits to Program Banks across Vanguard Cash Plus and Vanguard Brokerage Accounts with like registrations to offer maximum FDIC coverage up to $1.25 million for individual accounts and $2.5 million for joint accounts when at least 5 program banks are utilized. VBS will aggregate and allocate Bank Sweep deposits for trust accounts at the account level and not at the beneficiary level. FDIC coverage may be decreased based on Program Bank limits and whether you've opted out of any Program Banks and is subject to applicable FDIC coverage limits. You are solely responsible for monitoring the aggregate amount that you have on deposit at each Program Bank in connection with FDIC limits, including through other accounts at VBS.
All investing is subject to risk, including the possible loss of the money you invest.