Current Issue » ParentCare » Vol. 7

Bank Deposits ~ Safe and Secure?

By Frederick M. Misilo, Jr., Esq.

Over the past two months, we have experienced the worst economic downturn in recent memory. Everyone is worried about job security, retirement account balances, and what the future holds for all of us. On the national and international levels, we are witnessing the collapse and consolidation of traditional banks and investment firms. In Massachusetts, we are anticipating mid-year emergency budget reductions from Governor Patrick which will surely have a negative impact on the lives of individuals who receive state supported services. For most individuals, there is a sense of anger and powerlessness over protecting our assets. My office received numerous calls expressing concern and confusion about the types of protection that exist for bank deposits in a variety of banking institutions. Due to the volume of calls received, I am writing this article to provide an overview of what types of protection is available for deposits in specific settings.

FDIC Insurance

The Federal Deposit Insurance Corporation (FDIC) insures deposits in most banks and savings institutions located in the Untied States. The FDIC protects depositors against the loss of their deposit if an FDIC-insured bank or savings association fails. FDIC insurance covers all types of deposits received at an insured bank, including deposits in checking, NOW, and savings accounts, money market deposit accounts, and certificates of deposit (CDs). The FDIC does not insure stocks, bonds, mutual funds, life insurance policies, annuities, municipal securities, or U.S. Treasury bills, bonds or notes. The basic insurance amount was raised last month from $100,000 to $250,000 per depositor, per insured bank, and applies to all depositors of an insured bank. This increase, however, is temporary and lasts for one year from the enactment of the recent economic recovery bill signed by President Bush. There is some expectation, but no guarantee that it will be extended. You can calculate insurance coverage using the FDIC’s online Deposit Insurance Estimator at

DIF Insurance

The Depositors Insurance Fund (DIF) is a private, industry-sponsored insurance fund that insures in full all deposit accounts at Massachusetts state-chartered savings banks above FDIC insurance limits. The combination of FDIC and DIF insurance provides customers of Massachusetts-chartered savings banks with full deposit insurance on all their deposit accounts.

SIF Insurance

The Share Insurance Fund (SIF) is a private fund owned by member co-operative banks and insures all deposits at cooperative banks in Massachusetts above FDIC limits. The combined insurance coverage by FDIC and SIF provides customers of Massachusetts-chartered co-operative banks with full deposit insurance on all their deposit accounts.
NCUSIF Share Insurance

The National Credit Union Share Insurance Fund (NCUSIF) is operated by the National Credit Union Administration, a federal government agency that charters and supervises federal credit unions. The NCUSIF provides all members of federally insured credit unions with $250,000 in coverage for individual accounts. These accounts include regular shares, share drafts (similar to checking), money market accounts, and share certificates. NCUSIF coverage does not cover losses on money invested in mutual funds, stocks, bonds, life insurance policies, and annuities.

If a person has more than $250,000 at any single credit union, several options are available for additional coverage through separate insurance provided by NCUSIF. Therefore, it is possible to have deposits of more than $250,000 at one insured federal credit union and still be fully insured. You can calculate insurance coverage using the NCUSIF Share Insurance Estimator at

SIPC Insurance

Cash held at brokerage firms is housed in a depository institution, and the deposits are covered by the FDIC insurance up to $250,000 per depositor. Securities are protected under the SEC Customer Protection Rule, which requires that customer assets be segregated from brokerage firm assets in order to ensure their safety. In addition, securities are protected by SIPC insurance. SIPC was created by Congress in 1970 to protect customers of member broker-dealers that may fail or may be liquidated. The protection is limited to $500,000 per customer, including up to $250,000 in cash. SIPC does not protect customers against market risk. Most brokerage firms also offer additional brokerage insurance in excess of SIPC coverage, commonly referred to as “excess SIPC”. The SIPC limit of $500,000 per account does not mean that the account will receive only up to $500,000. The account will receive a pro-rata share of all client assets recovered in liquidation and then will receive up to $500,000 from SIPC to make up any difference that may still exist.

I hope you find this information helpful.

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