Originally Posted by wanaberetiree
Thank you all for answers!
I am surprised to see not too many people concerned about this.
Maybe I am wrong worrying about this and it's an insignificant detail...
I think it is a legitimate point. The thing to consider is the nature of the type of claim that could be made. If the claim is specific to you or a small group of account holders then the insurance is probably sufficient.
The real issue comes up with something that would be pervasive and be a claim that other account holders would also have so that the insurance is exhausted without their being enough to pay all claims.
I know when I saw this come up before it was pointed out that each fund is a separate fund and is separate from other funds. So if there was a problem with Fund A that wouldn't affect any money you or anyone else had in Fund B. And I agree that is helpful. So, if someone for example embezzled everything in Fund A then if you had other funds in Fund B those funds would not be jeopardized (an argument perhaps for not putting all your money in one fund...)
That said...the scariest risk is that you send money to Vanguard (or Fidelity or whoever) and they have this nice web site that says the money is there and you get confirmations and you think you have $X in Wellesley and $Y in the total stock fund and $Z in a bond fund, etc. But....how do you really know that you do? Maybe when you sent that money in, someone took the money and invested it elsewhere or stole it or borrowed it. And maybe this happened to a lot of depositors and there really is nothing there and it is a house of cards and someday it all falls down and there are massive claims made which far exceed the amount of insurance.
Now, truthfully, I think it is extremely unlikely that such a thing will happen with a large company like Vanguard or Fidelity, etc. You see that thing much more typically in investments with smaller outfits.
In our case we have split between Vanguard and Fidelity. We have more in Vanguard but haven't put quite all the eggs there.