SIPC is the Securities Investors Protection Corporation. Its purpose is to make sure that investors' accounts are protected up to certain limits. SIPC pays when brokerage house that holds your investments becomes broke. It is not meant to restore losses that occurred because of market fluctuations.

SIPC is brokerage account protection for the little guy. The customer who entrusts their business with ABC Brokerage. SIPC will protect your account up to $500,000. This is broken down into two components: $400,000 for securities and $100,000 for cash, CD, or money markets, and like instruments. It is important to reiterate, that SIPC insurance pays claims only when your broker-dealer goes belly up. It does not give you your money back because of short-term bad investments.

You can check with your brokerage house to determine whether they are a member of SIPC. It should also be noted that many broker-dealers may have additional insurance on your brokerage accounts. Remember SIPC is a friend of all investors it protects. It insures against brokerage houses that may default, while you invest with them.

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