Consumer advice for bank bankruptcies

First, let's go through the protections consumers have.

Since Lehman Brothers went under, let's start with what protections consumers have for their brokerage accounts.

The Securities Investor Protection Corporation backs up any money you have with a brokerage that is overseen by the security and exchange commission. That's just about all of that money.

It guards against loss caused by the brokerage house, not the market. So if you have 1,000 shares of ABC stock at $1,000, that's what it backs up.

Top limit is $100,000 in cash and $ 400,000 dollars in securities for a $500,000 total.

Insurance giant, A.I.G. is scrambling to stay in business, so what happens if it or any other insurer fails?

Well then the states kick in. Insurance companies are guaranteed by individual states or association of insurers in those states.

Here in California there are two different guarantee groups. There is the California Life and Health Insurance Guarantee Association and the California Insurance Guarantee Association.

There are many fine print rules but the bottom line is you are covered for 80 percent of your insurance loss, generally. However, that tops out at $250,000 from the Life and Health Guarantee. The other generally tops out at $100,000.

The fine print can kill you here. For instance only a $100,000 in annuities are covered. No matter how much you have or how much is lost.

And finally the FDIC. You've read a lot about their rules lately, basically a $100,000 per person, per account, per bank.

So my one size fits all advice: Diversify! Spread out your risk among several banks, brokers and insurance companies. Don't push these rules unless you really understand them.

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