Charles Schwab FDIC insured

Is Charles Schwab FDIC or SIPC Insured?


Is Charles Schwab FDIC protected? For how much Charles Schwab brokerage and IRA accounts' cash, investments, and deposits have SIPC insurance coverage?


Is Charles Schwab FDIC Insured and SIPC Protected?


Charles Schwab has multiple insurance policies for the financial accounts it offers. There are limits and a lot of fine print, however.

For bank accounts, there is FDIC coverage. Savings and checking accounts are guaranteed up to $250,000 per customer, although there are FDIC policies that permit this number to increase under some situations.

For brokerage accounts, there is SIPC coverage. The insurance has a limit of $500,000 per customer. Half of this amount can be used to protect a free cash balance, so it has the same level of protection for cash as FDIC insurance.


FDIC vs. SIPC


There are some important differences between FDIC and SIPC guarantees. First, the FDIC is a U.S. government agency, whereas SIPC is a private organization funded by member brokerage firms.

Second, SIPC insurance only guarantees the number of shares in an account, up to the limits already mentioned. For cash, this is simply a dollar amount, similar to FDIC insurance. But for securities, it's an entirely different matter.

Securities are assets like stocks and mutual funds. Their prices are set by market fluctuations and are not guaranteed by SIPC, the FDIC, or any other body. SIPC only guarantees the number of shares in an account, up to the maximum dollar value mentioned above, which is calculated by multiplying the number of shares by the market price per share. The market price could be anything. It is determined by the market. If a stock price falls to zero, SIPC would not intervene. It would only guarantee the number of shares in an account.

Although bond prices are more stable than stock prices, their prices nevertheless can and do fluctuate. Although bonds are considered cash equivalents, they are securities and are covered by the $500,000 guarantee.

Cash itself is not a security. Any cash in a Schwab brokerage account would be covered by SIPC’s $250,000 cash guarantee unless the account is enrolled in the brokerage firm’s bank sweep program. In this situation, idle cash would be swept into an FDIC-insured bank and then would be covered by FDIC insurance.


Charles Schwab fdic insurance


Combining Coverages at Schwab


It’s certainly possible to combine FDIC and SIPC guarantees. Schwab offers both bank and investment accounts, and each account type has its own insurance. For example, you could open a savings account with $250,000 of FDIC insurance and a brokerage account with $500,000 of SIPC protection, including $250,000 of insurance on cash. This would result in $500,000 in protection of cash (but only if cash is not swept into a program bank as described above, unless the program bank is a different bank than the institution providing the savings account).

Just as the FDIC has various rules that allow its $250,000 limit to be doubled, so does SIPC. For example, an IRA has a separate insurance policy from a taxable account. This rule results in $1 million in protection for the same customer across two accounts.

SIPC insurance covers securities and cash only, and FDIC insurance only covers cash. This means futures contracts and fixed annuities are generally not covered by insurance because they are neither. Futures contracts could be covered by SIPC if they are held in a special portfolio margining account.


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Beyond FDIC and SIPC


For really large securities accounts, Schwab has even more. The brokerage house has purchased a supplemental insurance policy through Lloyd's of London. It kicks in whenever SIPC limits are exhausted (and only if those limits are exhausted). The Lloyd’s of London policy will cover an account up to $150 million, of which $1.15 million can be for cash. The policy has a brokerage house limit of $600 million. After that point, there is no more insurance.

Schwab does not have an auxiliary insurance policy for bank accounts, so FDIC protection is it.


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Updated on 4/14/2022.


About the Author
Chad Morris is a financial writer with more than 20 years experience as both an English teacher and an avid trader. When he isn’t writing expert content for Brokerage-Review.com, Chad can usually be found managing his portfolio or building a new home computer.