SIPC vs FDIC insurance: the Core Difference

Here's the simplest version: FDIC is for your bank and SIPC is for your brokerage. Don’t make the mistake of mixing up these 2 terms.

FDIC insurance is backed by the U.S. government and was set up in 1933 to protect depositors after thousands of banks collapsed during the Great Depression. If your bank fails today, the FDIC steps in automatically and returns your money, up to the coverage limit. Being the founder, you do not need to apply for it, and you don’t pay for it. It just works, in your favor.

SIPC works differently. It was created by Congress in 1970 after multiple brokerage firm failures left investors with nothing. It is not a government agency, it is a nonprofit funded by its member brokerage firms. When a brokerage collapses, SIPC steps in to recover and return your securities and cash.

Both are essential for founders managing business finances across accounts. Here's the full comparison for SIPC vs FDIC:

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What FDIC insurance actually covers

The Federal Deposit Insurance Corporation covers your money at FDIC-insured banks, dollar for dollar, up to the limit. FDIC covers things you deposit, not things you invest.

What is included:

Standard deposit accounts all qualify:

• Checking and savings accounts
  
• Certificates of deposit (CDs)
  
• Money market deposit accounts (these are bank products, not to be confused with money market mutual funds)
  
• NOW accounts
  
• Cashier's checks and money orders issued by the bank
  

Are stocks insured by the FDIC

No, and this confuses a lot of people. The FDIC does not cover investments, even if you bought them through a bank. Following are the elements that do not qualify at all:

• Stocks, bonds, and mutual funds
  
• ETFs and annuities
  
• Crypto assets
  
• U.S. Treasury bills, bonds, and notes. These are separately backed by the U.S. government, but not FDIC-insured
  
• Life insurance policies
  
• Contents of safe deposit boxes
  

How the coverage limit actually works

The standard limit is USD $250,000 per depositor, per insured bank, per ownership category. That sounds rigid, but it is actually more flexible than it looks.

You can qualify for more than USD $250,000 at a single bank by holding accounts across different ownership categories. Single accounts, joint accounts, IRAs, trust accounts, and business accounts are all treated as separate categories.

For example, a founder with a personal checking account, a joint account with their co-founder, and an IRA at the same bank could be covered for USD $750,000 in total at that one institution. This means, as a company, you are not limited to just USD $250,000.

Most founders have to juggle multiple banks just to get meaningful FDIC coverage. With Aspire¹, your deposits are held with Column N.A., Member FDIC, and protected up to USD $100,000,000. You get coverage that goes far beyond the standard limit, without the admin of managing multiple banking relationships.

What SIPC insurance actually covers

SIPC protects your investments at brokerage firms, but only in a very specific situation, that the firm itself fails. It does not protect you from bad investments, market downturns, or poor financial advice. But, if your brokerage goes under and your assets go missing, then SIPC steps in to help you out and get your funds recovered.

Did you know that more than 3,200 U.S. brokerage firms are SIPC members, which covers most broker-dealers operating in the country. If your brokerage is U.S.-registered, there's a good chance it's already on the list.? You can verify membership on SIPC's website or check your brokerage's account agreement.

What is included in the SIPC insurance

• Stocks and bonds
  
• Mutual funds and money market mutual funds
  
• Treasury securities held in a brokerage account
  
• CDs held in a brokerage account
  
• Uninvested cash sitting in the account (up to the USD $250,000 cash sub-limit)
  

What SIPC insurance doesn't cover

When you are comparing SIPC insurance vs FDIC, the exclusions list for SIPC is important to understand, especially if you are holding anything outside of standard securities:

• Commodity futures contracts (unless in a special margining account)
  
• Foreign exchange trades
  
• Fixed annuity contracts not registered with the SEC
  
• Crypto assets (unless SEC-registered)
  
• Limited partnerships and investment contracts
  
• Any drop in the market value of your investments
  

What are the coverage limits for SIPC

SIPC covers up to USD $500,000 per account type, referred to as a separate capacity, with a USD $250,000 sub-limit for uninvested cash. Each account type is treated independently, even at the same firm.

So, a traditional IRA and a Roth IRA at the same brokerage each get their own USD $500,000 of coverage, giving a founder up to USD $1,000,000 in combined SIPC protection at that firm.

To understand this better, imagine a founder named Sara who keeps all her investments with one brokerage. She has $500,000 in a traditional IRA and $500,000 in a Roth IRA. Even at the same firm, these are treated as separate capacities, so each account receives up to $500,000 of SIPC protection, giving her $1,000,000 in total coverage.

If Sara also has an individual brokerage account with $300,000 invested and $50,000 in cash, that account receives its own $500,000 SIPC limit (including the $250,000 cash sub-limit). This way, she can keep multiple accounts at the same brokerage while still staying within SIPC protection limits.

Which protection applies to your business accounts

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If you're an Aspire founder, here's the short version. Your business account¹ and corporate card² are FDIC-insured through Column N.A. Your Aspire Treasury³ sits under SIPC through Atomic Brokerage LLC. Each product is already in the right framework. You don't have to think about it.

How to extend protection beyond the standard limits

Once you start scaling and holding larger cash balances, the default USD $250,000 FDIC limit and USD $500,000 SIPC limit can start to feel tight. The good news is you don't have to accept those as hard ceilings. There are practical ways to extend your coverage for SIPC vs FDIC without taking on more risk:

On the FDIC side

Spread across multiple FDIC-insured banks

• Each bank's limit applies separately
  
• USD $250,000 at 2 banks = USD $500,000 in total protection
  
• USD $250,000 at 3 banks = USD $750,000. Simple math, real impact.
  

Use different ownership categories at the same bank

• Single, joint, IRA, trust, and business accounts are each counted separately
  
• A founder using multiple categories at the same bank could access USD $750,000 or more
  
• No new banking relationship needed
  

Look into sweep networks

• Some platforms automatically spread your cash across multiple FDIC-insured banks
  
• No extra admin, no multiple logins
  
• Combined coverage can reach USD $5,000,000 for individual accounts and USD $10,000,000 for joint accounts
  
• Ask your provider whether they use a sweep network and how many banks are in it
  

On the SIPC side

Structure accounts across separate capacities

• Individual accounts, joint accounts, traditional IRAs, and Roth IRAs each get their own USD $500,000 limit
  
• A founder using multiple account types at the same brokerage can stack coverage without switching firms
  
• No extra cost, no extra complexity
  

Check if your brokerage carries excess SIPC insurance

• Some firms buy additional private insurance on top of SIPC's standard limits
  
• Coverage varies by firm. Some offer unlimited securities coverage and extra cash protection above the SIPC sub-limit
  
• This is usually disclosed in the account agreement or on the firm's website
  
• If you're holding substantial assets at one brokerage, it's worth a quick check
  

The bottom line

You don't need a finance degree to understand SIPC vs FDIC. You just need to know two things: what type of account you are using, and what framework protects it.

Bank deposits are FDIC. Brokerage assets are SIPC. If you are using both, both apply, on their own assets, under their own rules, up to their own limits. Neither one covers you against market losses. Both cover you against something arguably more dangerous: a financial institution failing and your money going with it.

For founders managing operating cash, corporate cards, and treasury products across borders, understanding this is part of building a financially sound business. Not just knowing where your money is, but knowing what happens to it if something goes wrong. Learn how to automate bookkeeping to keep everything streamlined as you scale.

The founders who build for the long term are the ones who ask these questions early. If you got this far, you are already ahead.

Frequently asked questions

What is the main difference between SIPC vs FDIC?

FDIC covers deposit accounts at banks up to USD $250,000 per depositor per bank. SIPC covers securities and cash in brokerage accounts up to USD $500,000 if the firm fails. Different accounts, different rules.

Are stocks insured by the FDIC?

No. FDIC only covers deposit accounts. Stocks, bonds, and mutual funds are not FDIC-insured, even if bought through a bank.

Are brokerage accounts FDIC-insured?

Not directly. Brokerage accounts are SIPC-covered. If your brokerage sweeps uninvested cash into an FDIC-insured bank, that cash gets FDIC protection up to USD $250,000.

What happens if my bank or brokerage firm fails?

FDIC returns your insured deposits automatically, usually within a few business days. SIPC works with a court-appointed trustee to recover your assets. You may need to file a claim.

Is Aspire's business account FDIC-insured?

Yes. Your deposits are held with Column N.A., Member FDIC, and insured up to USD $100,000,000. That's significantly above the standard USD $250,000 limit, so most founders won't need to spread funds across multiple banks just to stay protected.