What Does SIPC Insurance Cover? Limits, Cash, and Broker Failure

SIPC insurance covers the securities and cash held in your brokerage account if the brokerage firm fails and your assets are missing, up to $500,000 per customer, with a $250,000 sub-limit for cash. It does not cover investment losses, bad advice, or a decline in the market value of what you own. The protection exists for one situation: a SIPC-member broker-dealer goes under and cannot return what belongs to customers.¹

Assets SIPC Protects

Coverage applies to securities and cash held in a brokerage account in connection with buying or selling securities. The Securities Investor Protection Act’s definition of a covered security is broad, and in practice it reaches:

Stocks, corporate bonds, municipal bonds, and government bonds
U.S. Treasury bills, notes, and bonds
Mutual funds, including money market mutual funds (classified as securities, not cash, under SIPC rules)
Certificates of deposit held through a brokerage account
Options on securities or securities indexes, including puts, calls, and straddles
Notes
Cash held in the account for the purpose of buying securities, up to $250,000

Exchange-traded funds are not named in the statute, but the definition of “security” includes “any other instrument commonly known as a security,” which reaches them in practice.¹

What SIPC Does Not Cover

The exclusions matter as much as the inclusions, because they are where investors most often assume protection that isn’t there. SIPC does not cover:

Market losses. If your portfolio falls in value, SIPC does nothing.¹
Losses from bad or unsuitable investment advice.
Worthless securities. If a company goes bankrupt and its stock is wiped out, SIPC does not reimburse you.
Commodity futures contracts, unless held in a special portfolio margining account.
Foreign exchange trades.
Fixed annuities that are not registered with the SEC as securities.
Unregistered investment contracts, including limited partnerships not registered under the Securities Act of 1933.
Most cryptocurrency and digital assets.²

The crypto exclusion surprises many account holders. Under SEC staff guidance updated in February 2026, an investment contract is treated as a “security” under SIPA only if it is the subject of a registration statement filed under the Securities Act of 1933. Unregistered crypto assets remain outside SIPC’s reach even when a broker-dealer and customer agree to carry them in a securities account under the Uniform Commercial Code.²

How the $500,000 Limit Works

The $500,000 ceiling (including $250,000 for cash) applies per customer per “separate capacity” at the same brokerage firm. Different capacities each get their own full limit; accounts held in the same capacity are combined and share a single limit.³

SIPC treats each of the following as its own capacity:

Individual accounts
Joint accounts
Traditional IRAs
Roth IRAs
Trust accounts created under state law
Corporate accounts
Accounts held by a guardian for a minor
Accounts held by an executor for an estate

Two individual brokerage accounts at the same firm share one $500,000 limit. An individual account and a Roth IRA at the same firm are separate, so the same customer can be protected up to $1 million across the two.⁴

Cash in the Account and Sweep Programs

Cash coverage depends on where the cash is sitting. A free credit balance (uninvested cash that has not been swept anywhere) is generally covered by SIPC subject to the $250,000 cash sub-limit. Cash swept into a money market mutual fund is also protected by SIPC, because money market funds count as securities.⁵

A bank deposit sweep is different. When a brokerage sweeps uninvested cash into one or more FDIC-insured banks, that cash is generally covered by FDIC insurance (up to $250,000 per depositor per bank) rather than by SIPC. If you carry a large cash balance at a brokerage, check which type of sweep the firm uses, because that alone decides which program protects you.⁵

SIPC and FDIC Are Not the Same Thing

FDIC insurance covers deposits at banks (checking, savings, CDs, money market deposit accounts) up to $250,000 per depositor per bank per ownership category. SIPC covers securities and cash at brokerage firms up to $500,000 per customer. Neither covers investment losses. The FDIC does not cover stocks, bonds, or mutual funds even when they are sold through a bank, and SIPC does not protect the value of any security, only the custody of it.⁶¹

Timing also differs. FDIC coverage triggers automatically when a bank fails, and depositors usually see their money within days. SIPC protection requires a claim filed with a court-appointed trustee, and the process can take considerably longer.⁶

What Happens if Your Broker Fails

When a SIPC-member firm fails, SIPC asks a federal court to appoint a trustee to oversee the liquidation. The trustee secures the firm’s records and begins returning customer property. If records are in good shape, the trustee may arrange a bulk transfer of accounts to another brokerage, which is the fastest way for customers to regain access to their assets.⁷

Whether or not accounts are transferred, customers must file a claim. The trustee publishes notice of the liquidation and mails claim forms to customers identified in the firm’s records for the prior 12 months. Two deadlines apply: an initial court-set deadline (typically 30 or 60 days) and a hard six-month deadline measured from the date of the published notice. Claims filed after six months are denied, and the six-month cutoff cannot be extended.⁸

Gather account statements, trade confirmations, and relevant correspondence to back up the claim. The trustee calculates each customer’s “net equity” (what the firm owes you minus what you owe the firm) valued as of the filing date, which is generally the date the liquidation began.⁹ Available customer property is distributed pro rata. If that distribution does not fully satisfy your claim, SIPC advances funds up to the $500,000 limit. Anything still short of what you are owed becomes a general unsecured creditor claim against the firm’s estate.⁸

In smaller cases where total claims fall below $250,000 in the aggregate, SIPC can process claims through a “direct payment procedure” without a full court liquidation.⁷

Nearly every broker-dealer registered with the SEC is required to be a SIPC member. The narrow exceptions are firms whose business is limited exclusively to selling registered open-end mutual funds or variable annuities. A non-member firm has to disclose that fact to customers before handling securities transactions. You can verify a firm’s membership through the SIPC member list at sipc.org or FINRA’s BrokerCheck tool.⁴¹⁰

Coverage Above the SIPC Limit

Many large brokerages buy supplemental private insurance, often called “excess of SIPC” coverage, that sits on top of the standard limits. Terms vary by firm:

Fidelity offers up to $1 billion in aggregate excess-of-SIPC coverage with no per-customer dollar limit on securities and a $1.9 million per-customer limit on cash awaiting investment.¹¹
Charles Schwab maintains a $600 million aggregate excess-of-SIPC program through syndicates of Lloyd’s of London.¹²
Ameriprise Financial provides excess coverage with a $1.9 million per-customer cash limit and a $1 billion aggregate policy limit.¹³
Raymond James carries $750 million in aggregate excess-of-SIPC coverage through Lloyd’s of London syndicates, with a $1.9 million per-customer cash sub-limit.¹⁴

Excess-of-SIPC coverage does not protect against market losses either, and it is subject to firm-wide aggregate limits. If a very large firm failed and total losses exceeded the aggregate policy limit, some customers could still face shortfalls.

1
SIPC. What SIPC Protects
2
SEC. Frequently Asked Questions Relating to Crypto Asset Activities and Distributed Ledger Technology
3
SIPC. Investors With Multiple Accounts
4
SEC. Investor Bulletin: SIPC Protection, Part 1
5
SEC. Cash Sweep Programs: Uninvested Cash in Your Investment Accounts
6
Experian. SIPC vs. FDIC Insurance
7
SIPC. How a Liquidation Works
8
SEC. Investor Bulletin: SIPC Protection, Part 2: Filing a SIPC Claim
9
SIPC. How the Claims Process Works
10
SIPC. Introduction
11
Fidelity. Safeguarding Your Accounts
12
Charles Schwab. Account Protection
13
Ameriprise Financial. Understanding SIPC and FDIC Coverage
14
Raymond James. Account Protection