Are Deposits in Credit Unions Insured?

Nov 3rd, 2014     Credit Unions

Credit unions are non-profit organizations administered and owned by a group of members who are also its customers. Credit unions provide services and products that are similar to banks. However, they are not the same as banks and differ largely in ownership, region of operations as well as length and breadth of product offerings. We shall discuss these differences in a detailed manner in a separate article but from a retail customer’s point of view, both banks and credit unions are financial service providers where we deposit our money to keep it safe and gain some interest on it and thus, it is important to understand whether our money deposited in credit unions is safe and insured or not? Credit unions deposits are similar to that of checking, savings and deposit accounts and are insured by government or private organizations.

NCUA insures majority of the Credit Unions

In case of heavy losses or bankruptcy, banks are covered and insured by FDIC (Federal Deposit Insurance Corporations). Likewise, federally insured credit unions are insured by NCUSIF (National Credit Union Share Insurance Fund); NCUSIF is supported and backed by the US government. NCISIF are administered by NCUA (National Credit Union Administration). Some credit unions do not come under federal insured credit unions. Such credit unions are likely to have private insurance. As safety and security are the main reasons of deposits, it’s always a must to do a thorough research while depositing with credit unions, to know its insurance back up and features.

Expert Advice: Always prefer Credit Unions insured by NCUA (NCUSIF)

NCUA Insures Credit Union Deposits

How much is insured by NCUA?

In case the federal credit union faces failure, the US government assures to provide funds deposited in the accounts. NCUSIF provides up to $250,000 reimbursements “per depositor per institution” in case of the credit union failure. The regular share deposit and IRA deposits (retirement accounts) are insured separately for $250,000. If the amount deposited by the depositor is less than $250,000 than the depositor would be covered for the amount deposited in the account. In some cases, deposits might be covered for more than $250,000, as it depends on the account management system of the depositors.

Additional Insurance coverage by NCUSIF

Although the maximum insurance for an individual account is $250,000, you can avail a much higher insurance with little planning and account structuring.

Federal credit unions provide separate coverage for account holders on other type of accounts apart from the individual accounts. The other accounts that can be covered are joint accounts, trust accounts, retirement accounts, revocable trusts and irrevocable trusts.

NCUSIF provides additional $250,000 coverage apart from the individual accounts at each federal credit union. If the members are qualified for the above mentioned accounts, then each of these accounts would have their very own insurance coverage which in turn forms and aggregate.

We have listed a table below with examples to help you understand this better:

Individual Coverage:

Individual account Individual $ 250,000
KEOGH Retirement $ 250,000
Individual Retirement account (IRA) Individual $ 250,000
Total $ 750,000

Accounts for a married couple:

Individual Account Husband $ 250,000
Individual Account Wife $ 250,000
Joint Tenancy Accounts Husband & Wife (Joint) $ 500,000
Testamentary Revocable Trust Account Husband as Trustee for Wife $ 250,000
Testamentary Revocable Trust Account Wife as Trustee for Husband $ 250,000
Individual Retirement Accounts(IRA) Husband & Wife (Both have IRA account) $ 500,000
Total $ 2,000,000

Accounts with 4 family members

Individual Account Husband $ 250,000
Individual Account Wife $ 250,000
Individual Account Child A $ 250,000
Individual Account Child B $ 250,000
Joint Account Husband & Wife $ 250,000
Joint Account Husband & Child A $ 250,000
Joint Account Wife & Child B $ 250,000
Joint Account Child A & Child B $ 250,000
Testamentary Revocable Trust Account Husband as Trustee for Wife $ 250,000
Testamentary Revocable Trust Account Wife as Trustee for Husband $ 250,000
Testamentary Revocable Trust Account Husband as Trustee for Child A $ 250,000
Testamentary Revocable Trust Account Wife as Trustee for Child A $ 250,000
Testamentary Revocable Trust Account Husband as Trustee for Child B $ 250,000
Testamentary Revocable Trust Account Wife as Trustee for Child B $ 250,000
Testamentary Revocable Trust Account Husband $ 250,000
Testamentary Revocable Trust Account Wife $ 250,000
Individual Retirement Account (IRA) Wife $ 250,000
KEOGH Husband $ 250,000
Total $ 4,000,000

From the above illustrations, we can clearly see that based on the eligibility, customers can avail insurance of much more than standard $ 250,000 from NCUA by carefully structuring their accounts and deposits.

What is not covered by NCUA?

In credit unions liquid cash and cash like investments can be stored with protection of NCUA, whereas money market funds, mutual funds, annuities and other investments are not covered by NCUSIF.

The NCUA insurance generally covers –

  • Current accounts
  • Saving accounts ( Deposit accounts)
  • Money market accounts
  • Certificate of Deposits (CD) such fixed deposit accounts and deposits made via bond
  • Individual Retirement arrangement accounts (IRA’s)

The insurance policy of the credit unions can be verified via a research through the NCUA. It’s always sensible to check how the credit unions are insured. As federally insured credit unions are covered by government, many have more confidence and faith in them while taking up deposits with credit unions. Information about the insurance can be verified by asking relevant questions and research. Private credit unions have private insurance. Hence most of the credit unions have some back up for their deposits.

Based on the suitability and trust factor one can sign up for credit union deposit of their choice. However private insurance information should be collected and reviewed before taking any decisions. Credit unions insured by NCUSIF are more reliable than the private insured credit unions as they have the back up of the US government. However though some credit unions deposits are not insured by the government, deposits can be made with them if the depositors are convinced by the private insurance based on their research and faith.


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