Here's the lowdown on 'private' bank and broker insurance

— -- Q: I've noticed several banks and brokerage firms claiming they have private insurance that protects accounts above the FDIC and SIPC limits. Should investors trust those promises?

A: Banks and brokers try so hard to win over customers' assets, they want to manage as much dough as they can.

So the insurance protection limits can cause a problem. The Federal Deposit Insurance Corporation, or FDIC, only guarantees individual accounts up to $100,000. And the Securities Investor Protection Corp, or SIPC, stands behind accounts up to just $500,000, including cash of $100,000. Banks and brokers would like to handle more of customers' assets than that.

That's where promises of outside insurance come in. I've noticed the same promises from several brokerage firms that I use. There's nothing to stop you from checking into the policies. You might ask the bank or brokerage firm for the name of the insurance carrier and the policy number. You could then call the carrier and inquire.

But even if the policy checks out, I don't take much comfort from these promises. First, how do you know the financial institution will keep paying the insurance premiums, even if the bank or broker's business is falling apart? Second, if a problem does arise, dealing with a third-party insurance company is a potential headache you'd rather not have.

If you really like your brokerage firm or bank, and want to keep more than the individual dollar limits with them, you may be able to title your accounts in a way to get added protection. This is easy to do if you're married. Otherwise, it's best to spread your money around a bit and stay below the limits.

Matt Krantz is a financial markets reporter at USA TODAY and author of Investing Online for Dummies. He answers a different reader question every weekday in his Ask Matt column at money.usatoday.com. To submit a question, e-mail Matt at mkrantz@usatoday.com. Click here to see previous Ask Matt columns.