Money market accounts offer investors a very low risk for a higher rate of return than the conventional savings or checking account which makes them a wonderful instrument for investments in our current economy.

Money market accounts can be purchased through your traditional lender or through brokers. The Federal Deposit Insurance Corporation (FDIC) provides coverage for monies deposited in money market accounts in case your bank fails. Money market accounts offered through brokers are covered by additional layers of security in addition to the FDIC. These include SIPC (Securities Investor Protection Corp) insurance and multiple bank coverage.

The Securities Investor Protection Corporation delivers insurance in case your broker fails or goes under.

FDIC coverage or protection insurance will cover your money market account up to $250,000 by law in case your bank or lending institution fails. FDIC is insurance provided by the federal government.

Brokers are intermediaries between investors and banks. The FDIC covers banks, but a broker is an agent linking your brokerage account with a bank money market account electronically. Your money is actually with the bank or lender. Make certain any broker you use clearly states in your contract with the broker your money market account is FDIC insured or the bank offering the money market account is insured with FDIC. Most brokers realize that investors want verification of FDIC insurance and will only work with lenders that are FDIC insured so it is rare to find a broker that doesn’t work with lending institutions that are not FDIC insured.

Numerous investors will work with brokerages because of the advantage of being able to have one money market account with more than one bank under one broker.  FDIC coverage is only for $250,000 for each investor per bank. You can have more than $250,000 of money market accounts insured with your broker if you have your money market account with more than one lender.

For example, you can have $250,000 with a money market in Bank A and $100,000 in a money market with Bank B, both insured with FDIC. If both banks are insured with FDIC, both of your money market accounts are covered in full. If you invest $350,000 with only Bank A then only $250,000 of your $350,000 money market account outlay is covered by FDIC insurance.

Additional protection for your savings is always a good thing!

The Securities Investor Protection Corporation delivers insurance in case your broker fails or goes under. Any cash or securities missing from your brokered accounts are covered by SIPC. SIPC insurance can vary between brokers or brokerages. Make certain any broker who handles your money market account has SIPC insurance coverage for all of your brokered account investments. Generally brokers that carry SIPC coverage have this information clearly displayed on their website or business letterhead and information.

Be careful of working with brokerages or brokers that scatter their deals or information with words such as “promise”, “pledge” or “safe”, but without a clear indication of FDIC or SIPC coverage to assure you have the additional layers of protection for your money market accounts.