To insure your millions, you may need another account
— -- Q: I have nearly $500,000 in a brokerage account, which means I'm close to the maximum of protection provided by the SIPC. Can I add my wife's name to the account and double my SIPC coverage on that account?
A: The Securities Investor Protection Corp., or SIPC, is a safety net designed to protect investors from unscrupulous brokers. Its website explains that "SIPC is neither a government agency nor a regulatory authority. It is a nonprofit, membership corporation, funded by its member securities broker-dealers."
When investors' assets go missing due to fraud or other improper conduct by a broker, SIPC is called in. SIPC is responsible for helping investors quickly recover their money and will make investors whole up to certain limits. Each customer's account is covered up to $500,000, including up to $100,000 for cash claims. SIPC is only concerned with helping investors get their money back and doesn't play a role in the investigation or punishment of crooked brokers or brokerage firms.
As for your question, the answer is no. You cannot double an account's $500,000 in total protection to $1 million by adding your wife's name, says Josephine Wang, general counsel at SIPC. The limit remains $500,000, including $100,000 for cash only.
It is possible, however, to open a second and separate joint account with the same financial institution. That second account would be treated as another account with the same $500,000 total protection, Wang says. Just make sure the second joint account is a true joint account. You'll want to make sure she has full access to the funds and makes contributions to the account as well as you.
If you're not interested in opening a joint account with the brokerage, there are a couple of things you can do:
• See if the broker offers supplementary private insurance. Many brokers claim they maintain additional coverage, usually covering balances in the millions. This may give you some piece of mind. However, there are problems. For one thing, you don't really know if the broker is telling the truth. You can visit SIPC.com and make sure your broker is covered by SIPC. But confirming private coverage is harder to do, if not impossible.
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