SIPC insurance refers to the scheme created by the
Securities Investor Protection Act of 1970, codified at 15 USC § 78aaa
et seq. In 15 USC § 78ccc, the statute creates a corporation called the Securities Investor Protection Corporation ("SIPC"), whose members are to be exactly all registered broker-dealers, with a few exceptions. According to the text of the statute, the SIPC is "not ... an agency or establishment of the United States Government" (15 USC § 78ccc(a)(1)(A)), but instead its members are required (by law) to contribute certain funds to the SIPC to maintain a "SIPC Fund" to be used for fulfilling the obligations of the law (15 USC § 78ddd).
According to 15 USC § 78eee(a)(3), if a member of the SIPC "has failed or is in danger of failing to meet its obligations to customers" or meets some other conditions, then the SIPC "may" file an application for a "protective decree" with a Court in respect of the failing member. If the Court grants the application, then the Court "shall forthwith appoint" a trustee chosen by the SIPC to administer the liquidation of the failing member: 15 USC § 78eee(b)(3).
The appointed trustee is then empowered and required to use the assets of the failing or failed member to "deliver securities to or on behalf of customers to the maximum extent practicable in satisfaction of customer claims for securities of the same class and series of an issuer": 15 USC § 78fff–1(b)(1).
Here's where the "insurance" aspect of this comes in. The problem at this point is that the failing or failed member may not have enough assets for the trustee to deliver the securities that the member was holding on behalf of its customer. To solve that problem, 15 USC § 78fff–3 provides that the SIPC "shall advance to the trustee such moneys, not to exceed $500,000 for each customer, as may be required to pay or otherwise satisfy claims for the amount by which the net equity of each customer exceeds his ratable share of customer property", subject to a few exceptions.
To step back a bit, this process only applies if the SIPC first seeks a "protective order" in Court in respect of one its members. As we discussed, its members are registered broker-deals. Mutual funds purchased at the Vanguard website are held by the The Vanguard Group, Inc., which is not a registered broker-dealer (the list of registered broker-dealer is
available here). The SIPC scheme does not have any application to your dealings with The Vanguard Group, Inc.
If, however, you obtain a Vanguard brokerage account and use it to purchase securities, then you are dealing instead with "Vanguard Marketing Corporation", which is actually a registered broker-dealer and a member of SIPC (and in the list).
Also in the list is "Vanguard Capital", but a Google search
suggests that this is a company that "is not affiliated with the Vanguard Group of mutual funds" and merely has a similar name. It may even be out of business because its website is currently down.