How to Maximize FDIC and SIPC coverage

We’ve all heard the horror stories… Bank runs in the early 1900s leaving banks dried up and depositors penniless. Lehman Brothers’ failing in 2008–09 with $106 Billion in customer assets, or even seen the Bernie Madoff scandal leaving so many in the dust.

All of these situations left so many people missing money and losing security, and these big and scary stories are the ones that always seem to stick in our heads. But is this still a relevant fear in the modern age of 2026? How concerned should you really be about failing banks and brokers?

SUMMARY:

We’ve all heard the horror stories of early 1900s bank runs, Lehman Brothers’ 2008 failure, and the Bernie Madoff scandal or even recently SVB, but in 2026 these fears are largely outdated thanks to strong protections. Almost all U.S. banks and brokerages carry FDIC insurance for deposits (up to $250,000 per depositor, per bank, per ownership category) and SIPC protection for brokerage accounts (up to $500,000 per separate capacity, including $250,000 in cash). By using different ownership categories — such as individual, joint, IRAs, and revocable trusts — or spreading cash across networks like IntraFi, you can easily insure $1 million or far more at a single institution. Major firms like Schwab also provide substantial excess SIPC coverage on top of the base limits. While these protections don’t cover market losses or bad investment decisions, they have proven highly effective in past failures, virtually eliminating bank runs since FDIC’s creation in 1933. Ultimately, the fear of institutional failure is far less risky than trying to time the market, so sensible investors should focus on time in the market rather than letting rare events keep them on the sidelines.

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What protections do you have?

Almost all banks and brokerages have insurance to cover losses like this – FDIC for banks and SIPC for brokerages/investments.

FDIC: Covers up to $250,000 of cash held in the accounts.

SIPC: Covers up to $500,000 of investments and includes up to $250,000 in cash coverage.

If your custodians fail, like in the case of Lehman or Madoff, then your investments up to those limits are covered.

The vast majority of banks and brokerages in the US have this coverage. While not always required, investors and depositors typically demand this coverage when deciding who to work with.

What if I have more investments than that limit?

So now you know the limits, but what happens if your investments are over the limits? How can you protect all of it?

Your cash and investments are only covered by those insurances up to the dollar limit. Above that, you may not be able to receive your funds back.

In order to be fully covered, you will need to know the specifics of the coverage limits.’

FDIC

$250k per depositor, per bank, per ownership category.

What that means is if you have a different ownership category, bank, or depositor, the $250k limit is reset.

You can often cover $1M+ at a single bank, How? –

Single account (yours): $250k
Joint account (with spouse): $500k ($250k each)
Revocable trust (with beneficiaries): Up to $1.25M (5+ beneficiaries × $250k each, rules apply)
IRAs/Retirement accounts: Separate $250k each

Just by doing it yourself within one bank and spreading across ownership categories and depositors, you can easily get coverage that exceeds the $250k limit.

Another option you have is that you can spread the accounts over different banks, keeping under the 250k limit at each. This method would require much more management on your part to ultimately get the same FDIC coverage you would get if you spread it instead across ownership categories at one bank.

There are also services that distribute the cash across many different banks, allowing you to access millions in aggregate FDIC insurance across a network of banks. In this setup, your account is in one place making things simple for you, but the cash is spread across dozens of other insured banks. Multiple services exist that will do this for you. One service is called IntraFi.

SIPC

Now for investments and brokerages

Keep in mind this only covers broker failure, so if there was a loss due to investment decisions, that will not be covered.

The fine print of this coverage is – $500k total per separate capacity with up to $250k cash max.

Same owner and same account types are aggregated for this limit, so all brokerage accounts titled in your name will be combined and covered under the same $500k limit. All IRAs are aggregated for this as well and so on.

Example: You have a Roth account, traditional IRA, and a taxable account all at Schwab. Since they are all different account types, then each of those accounts has $500k coverage, so you will be covered for a combined total of $1.5 million.

Spouse accounts will also have their own coverage amounts, so if your spouse also has those three account types, they will also each be covered for $1.5 million. This would bring total household coverage for securities to $3 million.

We use Schwab as our custodian at Hamilton Financial Planning and they are covered by the SIPC standard $500k with $250k cash.

In addition, Schwab uses excess coverage for their clients. This insurance works in addition to the SIPC coverage and covers accounts up to a combined return of $150 million per customer (this includes what SIPC pays and the excess policy).

So if you lost $1 million, SIPC would cover $500k and the excess coverage would take care of the other $500k.

Coverage Maximizing

If you’re interested in maximizing your coverage, there are ways to do it.

– Manually spread your money or investments across different custodians or banks

– Use services that automatically spread your cash to maximize FDIC coverage

– Use different account types (Individual, Joint, IRA, Trust)

– Work with a custodian that has excess coverage agreements.

Bank runs – a thing of the past

Thankfully, with the advent of FDIC deposit insurance in 1933 as a result of the Great Depression, people had no reason to run on the bank, since even if the bank failed they would still receive their deposits back. This virtually eliminated bank runs in the United States and since the establishment of FDIC it has built and maintained faith in the banking system.

Why we remember the big stories

So while institutions do fail, its incredibly rare. Even if they do fail, your money is guaranteed to be protected. There are ways to make sure all of the money is insured, then why do people still worry about these failures so much?

From a psychological perspective, people tend to remember the big scary stories, even if they rarely happen.

People are scared of flying because the failures of flying are such a spectacle when they happen. Even though it is well known that flying is the safest mode of transportation and that driving—the mundane and boring—is far more dangerous to our lives.

You can easily apply this psychology to investing,

People see these giant bank failures and investment fraud and it becomes so sensationalized that’s what they anchor to. The reality is you trying to time the market is much more risky to your portfolio than any institutional failure. Yet you think because it’s in your hands it’s less risky, when the reality is that risk is astronomically higher.

However you cut it, understand that time in the market always beats timing the market, and the fear of institutional failure should be no excuse for not investing.

So if you’re scared to invest, know that there are guardrails in place to protect your investments from any kind of institutional failure, and try to remember the psychology of why you may be so nervous in the first place.

If you have any questions head to HamiltonFinancialPlanning.com to find out more and schedule a free call with our fee only CFP fiduciary advisors who specialize in building financial plans and investment management for clients nearing retirement in Austin and Houston TX.

About Scott

Scott Hamilton is founder and chief financial officer at Hamilton Financial Planning, a wealth management firm that specializes in providing comprehensive financial planning for retirees. With over 20 years of experience in the financial industry, and having completed over 250 financial plans for retirees across all industries, but mostly the oil and gas industry, Scott is passionate about providing his clients with the tools and insight they need to achieve their financial goals. He has a Bachelor of Business Administration in finance from Texas State University and an MBA in international finance from Pepperdine University. Scott has also been happily married to his wife, Gayle, for over 25 years. To learn more about Scott, connect with him on LinkedIn.