Robinhood FDIC insured

Is Robinhood FDIC or SIPC Insured?

Is Robinhood FDIC protected? For how much Robinhood brokerage and IRA accounts' cash, investments, and deposits have SIPC insurance coverage?

Is Robinhood FDIC Insured and SIPC Protected?

The short answer to the question, ‘is Robinhood FDIC and SIPC insured?’ is yes. However, there are some details that investors should be aware of. Your cash balance, securities, and cryptocurrency holdings are all insured differently depending on a variety of factors.

In this article, we will explain the types of insurance Robinhood uses to protect its investors and what that means for you. Keep reading for more details.

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Is Robinhood FDIC Insured?

The first thing to note is that FDIC protection is for banks and banking customers. Robinhood is not a bank and does not use FDIC coverage to insure funds in trading accounts.

However, Robinhood does have a cash sweep program for uninvested funds. The brokerage works with a handful of banks that ‘hold’ investor cash until needed or requested by the investor. While funds are held in the partner banks, they are insured under FDIC.

It is important to note here that the cash sweep program is a part of Robinhood Cash Management. And, while Cash Management is still in operation at the time of writing, it is being phased out and is no longer accepting new accounts.

As Robinhood migrates to the new system, dubbed the Robinhood Spending Account, FDIC insurance will go from a cap of $1.25 million in coverage to $250K.

Is Robinhood SIPC Insured?

SIPC coverage is brokerage-side coverage, and all of your assets are covered by SIPC.

SIPC is different than FDIC insurance in a number of ways, however. First, there is no coverage for loss in value. This includes loss incurred from investments not working out as well as any loss from Robinhood’s accounts.

SIPC coverage is activated in the event of wrongdoing by Robinhood or if Robinhood faces some kind of financial turbulence. If funds or securities are somehow lost by Robinhood, for example, SIPC would step in and replace lost assets.

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Which Assets Are Protected?

In summary, your cash balance is protected by SIPC while it is in your brokerage account. SIPC covers accounts up to $500K. Half of that value ($25K) can be a cash balance. If your account is larger than the allowable insured amount, you will be happy to know that Robinhood also offers ‘excess of SIPC’ coverage (continue reading for more details).

If you are an existing Robinhood Cash Management customer, your cash balance is covered by FDIC up to $1.25 million while your cash is in the cash sweep program. If you are a Robinhood Spending Account customer, then your cash balance is FDIC insured up to $250K.

Cryptocurrency holdings are not insured by FDIC or SIPC.

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Other Forms of Insurance at Robinhood

In addition to the standard forms of insurance on offer, Robinhood also provides a couple of other forms of insurance to protect its investors.

“Excess of SIPC” Coverage

“Excess of SIPC” insurance goes a step further in protecting investors’ wealth. This type of coverage is in addition to normal SIPC coverage. That means it does not ‘kick in’ until the regular SIPC coverage has been depleted.

With ‘excess of SIPC’ coverage, an additional $1.5 million in cash and $10 million in securities are covered.

Crime Insurance for Cryptocurrencies

Another form of insurance that Robinhood provides is crime insurance for cryptocurrencies. Since cryptocurrencies are not considered to be legal tender yet, crime insurance is the only way that Robinhood can protect its customers from the unlikely event that digital assets are stolen from a Robinhood account.

While the exact amount of crime coverage is currently unlisted on the broker’s public documentation, Robinhood states that the coverage will replace ‘a portion’ of the affected crypto holdings. Robinhood’s crime insurance is provided by Lloyd’s of London.

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Ben Wright
About the Author
Ben Wright is an investor, a trader, an educator, and something of an explorer. He spends his days in the markets when he is not teaching or spending time with his family. Ben writes about stockbrokers, markets, investment vehicles, promotional offers, and tools that help investors make the most of their time in the markets.
Updated on 4/19/2022.