What is SIPC insurance? Coverage, limits, and how it protects you

SIPC is not the same as traditional insurance. In the failure of a SIPC-member brokerage firm, SIPC may protect up to $500,000 per customer (cash and securities combined), with a $250,000 limit on cash. It does not cover investment losses from market declines.

The Securities Investor Protection Corporation (SIPC) is a non-profit created by Congress. If a member brokerage shuts down and your assets are missing, SIPC steps in to replace your securities or pay out their value. SIPC does not cover declines in the market value of your investments.

Here’s what SIPC covers, how its limits work, and what it means for your accounts.

How does SIPC coverage work?

When a SIPC-member brokerage closes, your accounts are typically moved to another broker-dealer, according to FINRA. But if cash is owed or securities are missing, SIPC steps in and appoints a trustee to sort things out. 

That trustee works to:

• Recover as much of the firm’s assets as possible 
• Match securities back to the clients who own them 
• Tap SIPC funds to cover any remaining gap, up to the coverage limits 

The goal is simple: get your assets back to you. The timeline depends on the size of the failure, but SIPC is designed to help clients recover what they’re owed as efficiently as possible.

What does SIPC cover?

SIPC protects a broad range of securities held at member brokerages, including: 

• Stocks
• Bonds 
• Notes 
• Certificates of deposit (CDs) 
• Voting trust certificates 
• Money market mutual funds (in most cases) 

For the full list of covered securities, visit the SIPC website.

What SIPC does not cover

SIPC does not cover every type of investment or financial loss. Notable exclusions include: 

• Commodity futures contracts and currency positions — these fall outside SIPC’s scope 

• Declines in market value — if your investments drop in price, that’s market risk, not a brokerage failure. SIPC does not reimburse market losses 

• Investments not registered with the SEC — unregistered securities are generally not protected 

The key distinction: SIPC protects against the loss of assets due to a brokerage’s failure or misconduct. It does not protect against the normal risk of investing.

What are SIPC coverage limits?

SIPC covers up to $500,000 per qualifying account type at a single brokerage, including up to $250,000 in cash. Coverage is determined by account type — not by the number of accounts you hold. Here’s how it breaks down across common scenarios:

Scenario	SIPC coverage limit
Individual brokerage account	Up to $500,000 (including $250,000 cash limit)
Traditional IRA	Up to $500,000 (separate from individual account)
Roth IRA	Up to $500,000 (separate from individual account)
Joint brokerage account	Up to $500,000 (separate from individual accounts)
Two individual brokerage accounts at the same firm	Combined into one $500,000 limit

For more detail on how coverage applies across multiple accounts, visit SIPC’s page on account coverage.

SIPC vs. FDIC vs. NCUA

SIPC, FDIC, and NCUA each serve a similar purpose — protecting your assets — but they cover different types of accounts and institutions.

	SIPC	FDIC	NCUA
What it protects	Securities at member brokerages	Deposits at member banks	Deposits at member credit unions
Coverage limit	Up to $500,000 (incl. $250,000 cash)	Up to $250,000 per depositor	Up to $250,000 per depositor
Protects against	Brokerage failure, missing assets	Bank failure	Credit union failure
Type of organization	Non-profit membership corporation	Independent federal agency	Independent federal agency
Government-backed?	No — funded by member broker-dealers	Yes — backed by the full faith and credit of the U.S. government	Yes — backed by the full faith and credit of the U.S. government
Does not protect against	Market losses	N/A (covers deposits, not investments)	N/A (covers deposits, not investments)

The FDIC and NCUA protect cash deposits and carry an explicit U.S. government guarantee. SIPC protects investment securities but is a private, non-profit corporation — it does not carry a government backstop. Which one applies depends on where your assets are held and what type of assets they are.

Is SIPC a government agency?

No. Congress created SIPC through the Securities Investor Protection Act of 1970, and the SEC oversees it — but SIPC itself is not a government agency. It’s an independent, non-profit corporation funded by member broker-dealers.

Does SIPC cover theft or fraud?

Yes. SIPC can step in when a brokerage firm’s failure involves theft, fraud, or other misconduct that results in missing client assets. If securities are stolen or cannot be accounted for, SIPC is empowered to replace them or pay out their equivalent value, up to the coverage limits.

However, SIPC does not cover every type of fraud. If an individual broker recommends a bad investment that loses value, that’s an investment risk — not a loss SIPC covers. SIPC specifically addresses situations where the brokerage firm itself fails and client assets go missing. 

Is M1 SIPC-protected?

Yes. Your M1 Invest accounts are protected by SIPC  — up to $500,000 per account type. M1 is a member of both FINRA and SIPC. 

So if you hold a traditional IRA and a Roth IRA with M1, each is separately covered up to $500,000. That’s up to $1,000,000 in total protection across those two accounts. For more information on multiple accounts and coverage amounts, visit the SIPC website.

A brief history of SIPC

SIPC was born out of crisis. In the late 1960s and early 1970s, brokerages across the U.S. were shutting down, merging, or going broke. Investors were losing confidence — and in some cases, losing their assets. 

Congress responded by passing the Securities Investor Protection Act of 1970, which created SIPC and set the rules for how it protects investors when a brokerage fails.

Disclosures:

All examples above are hypothetical, do not reflect any specific investments, are for informational purposes only, and should not be considered an offer to buy or sell any products. M1 does not provide any financial advice. 

All investing involves risk, including the risk of losing the money you invest. Brokerage products and services are offered by M1 Finance LLC, Member FINRA / SIPC, and a wholly owned subsidiary of M1 Holdings, Inc.  

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