Brokerage companies
Brokerage firms are engaged in the sales and trading of securities. They deal with all types of securities and serve both individual and institutional clients. Investors looking to buy or sell individual securities must set up an account with a brokerage firm.

  1. Full service brokers - Provide extensive research and advice, and as a result, charge higher commissions.
  2. Discount brokers - Offer brokerage trading services at lower commission rates but provide no advice or recommendations.

Cash management
Brokerage firms compete directly with banks by offering to clients cash management tools, including money market mutual funds and credit cards.

Securities Investors Protection Corporation (SIPC)
A non-profit corporation created by Congress that insures the securities and cash in the customer accounts of member brokerage firms against the failure of those firms. Insures account holders up to a maximum of $500,000 for securities, $100,000 for cash or cash equivalents. The SIPC does not insure investors against market risks.

Insurance companies

The role of insurance
The primary role of insurance companies is to provide financial protection to policyholders against hazards that could cause significant financial loss. In return for premium payments from policyholders, insurance companies agree to reimburse them in the event of a loss. The insurer makes money by investing the premiums it receives.

Insurance will be reviewed in more detail later in this text, but below is a summary of the insurance industry.

Common forms of insurance
  • Life - Protects against the financial loss associated with the death of an individual, particularly the loss of income from a spouse or parent's death.
  • Property and casualty - A broad category of insurance that protects against loss of property, damage or other liabilities. Includes automobile, homeowners', workers' compensation and theft insurance.
  • Health insurance - Any insurance plan that covers medical expenses or health care services. Protects against loss from sickness or bodily injury. Includes disability income insurance.
Investment side of insurance
In addition to insuring against hazards, many insurance companies also sell investments or investment-like products. The most prevalent investment products offered by insurers are annuities and life insurance policies that also feature investment elements.

A number of insurance companies operate brokerage arms that trade securities on behalf of clients.

Insurance regulation
The insurance industry is regulated primarily by state insurance commissioners, though their broker-dealer subsidiaries are also regulated by the Securities and Exchange Commission, NASD and state securities administrators.


Mutual fund and Trust Companies

Related Articles
  1. Insurance

    How To Invest In Insurance Companies

    Knowing the special circumstances that insurance companies operate under helps in evaluating whether or not a listed insurance company is a good investment and whether the economic environment ...
  2. Insurance

    Explaining Insurance

    Insurance is a form of contract between an individual and an insurance company that spreads risk in exchange for premium payments.
  3. Insurance

    Understanding Your Insurance Contract

    Learn how to read one of the most important documents you own.
  4. Insurance

    Exploring Advanced Insurance Contract Fundamentals

    Understanding your contract can help you protect our family's financial security.
  5. Insurance

    For Life Insurers, Making Money Is A Numbers Game

    Life insurance is a data-driven industry that relies on complex financial models to predict future expenses and income from premiums and investments.
  6. Insurance

    Life Insurance

    Life insurance is an important component of basic financial planning. Find out how life insurance works and how insurance companies are able to profit through providing financial security to ...
  7. Insurance

    How Much Life Insurance Should You Carry?

    Learn how much - if any - insurance you really need.
  8. Insurance

    Top 5 Car Insurance Companies in Texas (PGR, ALL)

    Examine the five biggest automobile insurance companies operating in the state of Texas, ranked based on market share in the state.
  9. Insurance

    Life Insurance: putting a Price on Peace of Mind

    Would your death leave loved ones financially stranded? Find out how to ease your mind and keep them protected.
Frequently Asked Questions
  1. Where else can I save for retirement after I max out my Roth IRA?

    The first option to explore is to determine if you can contribute to a 401(k), 403(b), or 457 plan at work. If your employer ...
  2. How did George Soros "break the Bank of England"?

    In Britain, Black Wednesday (September 16, 1992) is known as the day that speculators broke the pound. They didn't actually ...
  3. What counts as "debts" and "income" when calculating my debt-to-income (DTI) ratio?

    It's important to know your debt-to-income ratio because it's the figure lenders use to measure your ability to repay the ...
  4. Who are Monsanto's main competitors?

    Learn about Monsanto Company's two main operating divisions and its main competitors within each sector, including The Mosaic ...
Trading Center