Updated August 3, 2026. Quick answer: it depends entirely on where the cash actually is, and most people do not know. Cash sitting in the brokerage itself is covered by SIPC — $250,000 of the $500,000 limit — and only if the brokerage fails. Cash swept out to partner banks is covered by the FDIC instead, at each bank, and it adds to any money you already hold at that same bank. That last point is the trap.
Three different things, three different answers
- Your investments. Covered by nothing. If a fund falls, that is not an insurable event under any of these programmes and never will be.
- Cash held at the broker. SIPC territory: it restores cash and securities missing from a customer account when a SIPC-member brokerage fails financially. The limit is “$500,000, which includes a $250,000 limit for cash” (SIPC).
- Cash swept to program banks. Now it is a bank deposit and FDIC rules apply, through the broker as your agent.
How a sweep is insured, and why it is not free money
When your broker places cash at partner banks it is acting as your agent, and the regulation says funds deposited by an agent are insured “to the same extent as if deposited in the name of the principal(s)” (12 CFR 330.7(a)). Coverage passes through the broker to you.
Which is exactly why it aggregates. Because the deposit is legally yours, it combines with any account you already hold at that same program bank. If your sweep places $250,000 at a bank where you personally keep $100,000, you are not covered for $350,000 — you are over the limit by $100,000 at that institution. Programmes advertising multi-million-dollar coverage across many banks are accurate about the total and silent about this overlap.
The three questions to ask your brokerage
- Is my idle cash swept to banks, or held at the broker? The answer changes which programme applies.
- Give me the current list of program banks. You need it to check for overlap with your own accounts, and the list changes.
- How much is placed at each one, and can I exclude a bank I already use? Many programmes allow an opt-out precisely because of this problem.
The recordkeeping condition nobody mentions
Pass-through coverage depends on the records showing who really owns the money. The FDIC presumes ownership is as the bank’s deposit account records state, and where those records are clear it treats them as binding and looks at nothing else (12 CFR 330.5(a)(1)). In a sweep you are relying on the broker’s and the bank’s bookkeeping to establish that the money is yours. That is normally fine, and it is worth knowing it is a condition rather than an assumption.
Structuring bank-side coverage properly: how to insure more than $250,000 · FDIC vs SIPC vs NCUA · brokered CDs vs bank CDs.
Insurance mechanics are read from 12 CFR part 330 via the official eCFR and from SIPC’s own statement of what it covers. No yield, spread or price appears on this page: that is market data and it changes daily. Confirm your own position with your institution before relying on any of it.