Are Money Market Accounts Federally Insured?

A money market account offers a balance between accessibility and potentially higher earnings than traditional savings options. Understanding the specific type of money market account is important, as federal insurance coverage varies significantly based on its structure and where it is held. This distinction is central to determining the level of protection your funds receive.

Money Market Deposit Accounts and FDIC Insurance

Money Market Deposit Accounts (MMDAs) are a type of savings account offered by banks and credit unions. These accounts provide interest earnings and allow some transactional flexibility, such as check-writing or debit card access, often with limits on monthly transactions. MMDAs are considered deposit accounts, similar to checking and traditional savings accounts.

MMDAs are protected by the Federal Deposit Insurance Corporation (FDIC) for accounts held at banks, or the National Credit Union Administration (NCUA) for accounts at credit unions. The FDIC is an independent U.S. government agency. FDIC insurance covers both the principal deposited and any accrued interest, protecting your funds in case an insured bank fails.

The standard FDIC coverage limit is $250,000 per depositor, per insured bank, for each account ownership category. Multiple accounts at the same institution, such as a checking and an MMDA, are combined for this limit if they fall under the same ownership category. To confirm if a bank is FDIC-insured, look for the official FDIC sign at bank branches, visit the FDIC’s BankFind tool online, or check for the “Member FDIC” logo on their websites and in advertisements.

Money Market Mutual Funds and SIPC Protection

In contrast to Money Market Deposit Accounts, Money Market Mutual Funds (MMMFs) are investment products offered by brokerage firms and investment companies. These funds pool money from investors to purchase short-term, low-risk debt securities like Treasury bills, commercial paper, and certificates of deposit. MMMFs are distinct from bank deposit accounts and are not FDIC-insured.

Instead, money market mutual funds held in a brokerage account may be protected by the Securities Investor Protection Corporation (SIPC). SIPC is a non-profit corporation that protects customers of brokerage firms that fail financially. SIPC protection covers missing securities and cash held by a brokerage firm, up to a limit of $500,000 per customer, including a $250,000 limit for cash.

SIPC protection safeguards against the loss of securities due to a brokerage firm’s collapse, not against losses from market fluctuations or a decline in investment value. For example, if a money market mutual fund’s underlying assets decrease in value, SIPC does not cover that loss. While MMMFs are low-risk investments, their value can fluctuate and they do not guarantee a fixed principal like FDIC-insured deposit accounts.

Distinguishing Account Types and Confirming Coverage

Given the differences in protection, accurately identifying your money market account type is essential. A primary indicator is where the account is held: accounts at a bank or credit union are typically Money Market Deposit Accounts, while those at a brokerage firm or investment company are usually Money Market Mutual Funds. Reviewing your account statements and terms and conditions from your financial institution can clarify the specific nature of your account, as these documents often explicitly state if it’s a deposit or investment product.

The account name itself can also offer a clue: “Money Market Deposit Account” or “Money Market Savings Account” indicates a bank product, while “Money Market Fund” or “Money Market Mutual Fund” indicates an investment product. If you remain uncertain, directly contact your financial institution. Ask for confirmation on whether your account is FDIC-insured or SIPC-protected, and request documentation that outlines its coverage.