Worried About Investing? Understanding Your Protection with SIPC Insurance

If you are concerned about investing because your investments aren't FDIC insured, here are three things that might help you sleep better at night. I'm Tyler, a former financial advisor and portfolio manager, and I create financial content for free to help you navigate your investing journey.

1. SIPC Insurance Coverage

Your investments actually are covered by what's called SIPC insurance (Securities Investor Protection Corporation insurance). This insurance provides coverage up to $500,000 per customer, with a $250,000 limit for cash holdings, similar to the FDIC.

2. Additional Private Insurance

Additionally, most major brokerage firms are also privately insured by Lloyd's of London, which extends your coverage should that firm become financially insolvent.

3. Ownership of Investments

Finally, even if your brokerage firm does become financially insolvent, they do not own those investments; you do. Your investments are held in what's known as street name, meaning you can usually transfer those investments to another brokerage firm should your current brokerage firm face insolvency.

But just to clarify, none of this protects you against losing money in the market; it only provides coverage if the firm itself becomes financially insolvent.

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