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What Does Deposit Insurance Cover?

FDIC deposit insurance protects money you hold at an FDIC-insured bank in traditional deposit accounts like:

  • Checking Accounts,
  • Savings Accounts,
  • Money Market Deposit Accounts (MMDAs), and
  • Certificates of Deposit (CDs).

If I own multiple businesses through LLC, is each LLC bank account at the same bank insured by FDIC?

Yes, each LLC bank account at the same bank is insured separately by the FDIC, provided each LLC is recognized as a separate legal entity. The Federal Deposit Insurance Corporation (FDIC) insures deposits up to $250,000 per depositor, per insured bank, for each account ownership category. Since each LLC is considered a separate legal entity, the insurance coverage applies individually to each LLC.

Here’s a breakdown of how FDIC insurance works in this context:

  1. Separate Legal Entities: Each LLC is treated as a distinct entity.
  2. Separate Coverage: Each LLC’s deposits are insured up to $250,000.
  3. Same Bank: This applies even if the accounts are held at the same bank.

For example, if you have three LLCs (LLC A, LLC B, and LLC C) and each has an account at the same bank, each account would be insured up to $250,000, resulting in a total coverage of $750,000 across the three accounts (assuming each account has at least $250,000).

It’s always a good idea to confirm this with your bank and review the specifics of your accounts and FDIC coverage.

Are brokerage accounts insured by FDIC?

Brokerage accounts themselves are not insured by the FDIC. However, certain components within a brokerage account can have different types of protections:

  1. SIPC Protection: Brokerage accounts are typically protected by the Securities Investor Protection Corporation (SIPC), which covers up to $500,000 per customer, including a maximum of $250,000 for cash claims. The SIPC protects against the loss of cash and securities—such as stocks and bonds—held by a customer at a financially troubled SIPC-member brokerage firm. It does not protect against market losses.
  2. FDIC Insurance: FDIC insurance may apply to the cash balances in a brokerage account if they are held in an FDIC-insured bank account, such as a sweep account or a bank deposit program within the brokerage. These are typically insured up to the standard $250,000 limit per depositor, per insured bank, for each account ownership category.

Key Points:

  • SIPC Coverage: Protects against the failure of the brokerage firm.
  • FDIC Insurance: Applies to cash balances in sweep accounts or other bank deposit products within the brokerage account, subject to standard FDIC limits.

It’s important to review the specifics with your brokerage firm to understand the protection available for your accounts and investments. More information could be found here: https://www.fdic.gov/resources/deposit-insurance/understanding-deposit-insurance/