NCUA Insurance Coverage: Protecting Your Credit Union Deposits

As a followup to my earlier article about the safety of credit unions, I wanted to shed some light on the National Credit Union Share Insurance Fund (NCUSIF), which is administered through National Credit Union Administration (NCUA). Thanks to the NCUSIF, no credit union members have ever lost money on insured deposits at an NCUSIF-backed credit union.

What is the NCUSIF?

Established in 1970, the NCUSIF insures your credit union deposits in much the same what that FDIC insurance protects your bank deposits. They collect insurance premiums and a deposit directly from member credit unions based on the total amount of their insured assets. The NCUSIF is also backed by the full faith and credit of the United States government. In case of a credit union failure, payouts are typically made to affected customers within three days of the failure.

What’s covered?

From their pamphlet on “How Your Accounts are Federally Insured“:

The NCUSIF provides all members of federally insured credit unions with $100,000 $250,000 in coverage for their individual accounts. These accounts include regular shares, share drafts (similar to checking), money market accounts, and share certificates… Members with traditional and Roth Individual Retirement Accounts (IRAs) and KEOGH retirement accounts at federally insured credit unions have additional coverage at each federally insured credit union where they qualify and become members… [As of April 1, 2006] the NCUSIF now insures member traditional and Roth IRAs for $250,000 in aggregate at each credit union. Additionally, NCUA insures member KEOGH accounts separately in the aggregate to $250,000 at each credit union.

The NCUA also has a handy online tool for estimating your coverage.

Maximizing your coverage

Since the retirement account protection is separate from insurance coverage on “regular” credit union accounts, an individual can actually protect up to $350,000 at an insured credit union using a combination of regular and retirement accounts. But what if that’s not enough? As is the case with FDIC insurance limits, you can stretch your coverage.

Perhaps the easiest way to stretch your coverage is to simply open accounts at multiple credit unions. Because NCUSIF limits are applied on a per credit union basis, you can open accounts at different credit unions. Just be share not to rely on different branches of the same credit union, as this would do nothing to increase your coverage.

An alternative approach would be to hold your funds in multiple ownership classes. Different individuals get their own limits, as do the same individuals holding funds in different ownership classes. For example, it’s possible for an individual and their spouse to hold up to $250k each in individual accounts with an additional $500k ($250k apiece) being held in a joint account. If that’s still not enough (luck you!) then you might want to explore trust accounts (either revocable or irrevocable), which qualify for separate coverage.