What is SIPC insurance?
Last updated August 2026
Short answer
The word insurance is doing damage here. People read the logo on a brokerage website and hear a promise about their portfolio. It is a promise about the brokerage.
What it actually covers
Cash and securities held at a failed SIPC-member brokerage: stocks, bonds, Treasury securities, certificates of deposit, mutual funds and money market funds.
The mechanism is restoration rather than compensation. If a firm fails and 100 shares that should be in your account are missing, SIPC works to put those shares back, whatever they are worth on the day.
Most customer assets are held separately from the firm's own and are simply transferred to another broker when a firm fails. SIPC covers the gap where that separation was breached.
The limits, exactly
$500,000 in total per customer, of which no more than $250,000 may be cash.
Someone holding $600,000 in securities and no cash is covered to $500,000. Someone holding $400,000 in cash is covered to $250,000 of it.
The limit applies per customer per firm by separate capacity, which is why an individual account and a joint account at the same broker are treated separately.
What it does not cover
Market decline. SIPC does not protect against the decline in value of your securities, in its own wording.
Bad advice, and worthless securities. SIPC states it does not protect individuals who are sold worthless stocks and other securities, nor against losses due to a broker's bad investment advice.
Commodity futures contracts with limited exceptions, foreign exchange trades, unregistered investment contracts, fixed annuities, stablecoins, currency and commodities. Cash held in connection with a commodities trade is also outside coverage.
Try it in Walnut
Walnut reads your connected brokerage account. Your assets stay at your broker, where the custody and any SIPC membership sit.
How to check your own broker
Membership is listed on SIPC's own site, and members are required to display membership. A firm you cannot find in that list is the thing to resolve before funding an account.
Some brokers carry additional private coverage above the SIPC limits through commercial insurers. That is a contract with an insurer rather than an extension of SIPC, so the terms are worth reading rather than assuming.
Where balances exceed the limits, using more than one brokerage is the straightforward answer.
Why this matters more than it used to
App-based brokerages have made it easy to open an account with a firm whose name you did not know last year.
The relevant checks are membership, registration in FINRA BrokerCheck, and whether assets are held at a recognised custodian.
None of that protects you from a bad investment, and it is not supposed to. It protects you from the firm rather than from the market.
How a liquidation actually works
When a member firm fails, a trustee is appointed and customer accounts are typically transferred in bulk to another brokerage, often within weeks.
Most customers never make a claim, because their securities were held separately from the firm's own assets and simply move. SIPC funds cover the shortfall where that separation failed.
Claims have deadlines set during the proceeding, so the practical advice is to respond to trustee notices promptly rather than assume coverage is automatic.
Sources
Coverage limits and exclusions are published by SIPC at What SIPC Protects. Broker registration can be checked at FINRA BrokerCheck. Walnut is informational and is not an investment adviser. This guide is educational and not personalized investment advice.
FAQ
How much does SIPC cover?
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The limit of SIPC protection is $500,000, which includes a $250,000 limit for cash. The limit applies per customer per firm, based on separate capacity, so accounts of different types at the same broker can each carry their own coverage.
Does SIPC cover investment losses?
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No. In SIPC's own words, it does not protect against the decline in value of your securities. It also does not protect people sold worthless securities, or losses caused by bad investment advice. It covers the failure of the brokerage, not the failure of the investment.
Is crypto covered?
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Generally not. SIPC lists unregistered investment contracts, stablecoins, currency and commodities among the things it does not protect, and digital assets that are unregistered investment contracts fall outside coverage.
Is SIPC the same as FDIC?
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No. FDIC insures bank deposits against a bank failing. SIPC covers securities and cash at a failed brokerage. Neither protects you from an investment losing value, and the cash limits differ: $250,000 at SIPC as part of the $500,000 total.
Does SIPC cover a broker that freezes withdrawals?
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Only if the firm actually fails and enters a SIPC proceeding. A working brokerage restricting trading or withdrawals, as happens during volatile periods or account reviews, is a dispute rather than a liquidation, and the route there is the firm's complaints process and FINRA rather than SIPC.