What the FDIC does not cover

The Federal Deposit Insurance Corporation (FDIC) protects money you keep in certain types of bank accounts, but not all of them. Investment accounts, retirement accounts held at a brokerage, and accounts at non-bank financial institutions fall outside FDIC coverage. Even at a bank, some products — like stocks, bonds, and mutual funds — are not covered, even if you buy them through your bank's investment department.

The key rule is straightforward: FDIC insurance covers money you deposit into the bank itself, not money the bank invests on your behalf. If your bank is holding your money as an investment rather than storing it as a deposit, the FDIC does not protect it if the bank fails.

Key Takeaways

  • Investment accounts, including stocks, bonds, and mutual funds, are not covered by FDIC insurance even when you buy them through a bank.
  • Brokerage accounts and retirement accounts held at investment firms are protected by SIPC (Securities Investor Protection Corporation), not the FDIC.
  • Accounts at credit unions are insured by the NCUA, not the FDIC, though the coverage limits are the same.
  • Money market funds and certain savings products marketed as investments may not carry FDIC protection, even if sold by a bank.
  • Accounts at non-bank lenders, payday loan companies, and money services businesses have no federal deposit insurance at all.

Investment products sold through banks

When you buy stocks, bonds, mutual funds, or exchange-traded funds (ETFs) through your bank, the FDIC does not cover them. Your bank may hold these investments in an account with your name on it, but the bank is acting as a broker or custodian, not as a deposit-taker. If the bank fails, these investments are yours to claim — they do not belong to the bank's creditors — but the FDIC insurance does not explore.

This matters because investment values go up and down. If you own a mutual fund worth $50,000 and the bank fails, you still own that mutual fund. But if the market drops and it is worth $30,000 when you retrieve it, you have lost $20,000. The FDIC does not restore the value.

The same rule applies to annuities, structured notes, and other investment products. If it is marketed as an investment rather than a place to store money, FDIC coverage does not explore.

Brokerage and retirement accounts

Accounts held at a brokerage firm — whether it is a standalone brokerage or the investment arm of a bank — are covered by SIPC (Securities Investor Protection Corporation), not the FDIC. SIPC protects you if the brokerage fails and cannot return your securities or cash. The coverage limit is $500,000 per account, with a $250,000 limit on cash within that account.

Retirement accounts like IRAs and 401(k)s held at a brokerage are also covered by SIPC, not the FDIC. If you have a traditional IRA at a brokerage and it holds stocks and mutual funds, SIPC covers it. If you have an IRA at a bank that holds only deposits (like a savings account or certificate of deposit), the FDIC covers it, but the coverage is separate from your other bank accounts — you get $250,000 of FDIC protection for all your IRAs combined at that bank, separate from the $250,000 you get for regular savings accounts.

Credit union accounts

Credit unions are not banks, and their deposits are not insured by the FDIC. Instead, they are insured by the NCUA (National Credit Union Administration). The coverage limits are the same as the FDIC — $250,000 per account type per person per institution — but the insurer is different.

If you have money at both a bank and a credit union, each institution's insurance is separate. A $250,000 deposit at a bank and a $250,000 deposit at a credit union are both fully covered, because they are at different institutions.

Credit unions can also offer investment products like mutual funds and brokerage services. Those products are not covered by the NCUA, just as they are not covered by the FDIC at a bank.

Non-bank financial institutions

Money services businesses, payday lenders, check-cashing services, and online lenders that are not banks do not have FDIC insurance. If you deposit money with one of these companies and they fail, there is no federal insurance protecting your deposit.

Some of these businesses are licensed and regulated by state authorities, but state regulation does not mean your money is insured. Before depositing money with a non-bank lender or money services business, check whether it is a bank or a credit union. If it is neither, ask what happens to your money if the company fails. Some may carry private insurance, but you cannot assume it.

Money market funds and similar products

A money market fund is a type of mutual fund that invests in short-term debt. Even though it sounds like a safe place to park money, it is not a bank deposit and the FDIC does not cover it. If you buy a money market fund through a bank or a brokerage, you own shares in that fund. If the fund's value drops or the fund fails, you lose money.

Some banks offer money market accounts, which are different. A money market account is a type of bank deposit account, and the FDIC does cover it. The name is similar, which confuses many people. If you are unsure whether a product is a deposit account or an investment, ask the bank directly: "Is this FDIC-insured?" A deposit account will be; an investment product will not.

How to check what is and is not covered

The FDIC provides a tool called the FDIC Coverage Calculator on its website. You enter your account balances and account types, and it tells you how much is covered at each bank. This tool covers only FDIC-insured accounts, not investments.

For investments held at a brokerage, check the brokerage's website for SIPC coverage information. Most brokerages display their SIPC protection clearly. For credit union accounts, the NCUA website has a similar tool to the FDIC's.

When in doubt, ask your bank or credit union in writing: "Is this account FDIC-insured?" or "Is this account NCUA-insured?" A written answer protects you if there is a dispute later.

Frequently Asked Questions

If I buy a CD through my bank, is it FDIC-insured?

Yes. A certificate of deposit (CD) is a type of bank deposit, and the FDIC covers it up to $250,000. The coverage is the same whether the CD is a regular savings account or a CD — both are deposits, not investments.

What if my bank fails and I have both a checking account and a savings account there?

The FDIC covers up to $250,000 across all your deposit accounts combined at that bank. A checking account and a savings account are counted together, not separately. If you have $150,000 in checking and $150,000 in savings, only $250,000 total is covered.

Are savings bonds FDIC-insured?

No. U.S. savings bonds are issued by the Treasury Department, not by a bank, and they are not FDIC-insured. They are backed by the federal government, which is different from FDIC insurance. If you buy a savings bond through a bank, the bank is just selling it to you — the FDIC does not cover it.

If I have money in a PayPal account or a digital wallet, is it insured?

It depends. PayPal and similar services partner with banks to hold your money. If your balance is held at an FDIC-insured bank, it may be covered, but you need to check PayPal's terms. Many digital wallets do not carry FDIC insurance. Contact the service directly to ask where your money is held and whether it is insured.

Can I get FDIC coverage on more than $250,000 at one bank?

Yes, if you use different account types. A regular savings account, a checking account, a money market account, and a CD are each separate categories. You get $250,000 coverage in each category. Retirement accounts (IRAs) are also a separate category with their own $250,000 limit. Joint accounts are a separate category too.