Share Insurance Facts

Not one penny of insured savings has ever been lost by a member of a federally insured credit union.  The federal insurance fund has several programs to help insured credit unions which may be experiencing problems.  Liquidations or failures are a last resort.  If a federally insured credit union does fail, however, the NCUSIF will make any necessary payouts to the credit union’s members.  These payouts are usually done within 3 days from the time the credit union closes its doors. 

As a member of an insured credit union, you do not pay directly for your share insurance protection.   Your credit union pays into the NCUSIF a deposit, and an insurance assessment, based on the total amount of insured shares and deposits in the credit union. Insured credit unions are required to deposit and maintain one percent of their insured shares and deposits in the NCUSIF.  The NCUSIF is backed by the full faith and credit of the United States government.

The Emergency Economic Stabilization Act of 2008, signed into law on October 3, 2008, increased the insurance coverage on accounts up to $250,000 through December 31, 2014. Most properly established share accounts in federally insured credit unions are insured up to the Standard Maximum Share Insurance Amount (SMSIA), which is $250,000 as of October 3, 2008. Generally, if a credit union member has more than one account in the same credit union, those accounts are added together and insured in the aggregate.  There are exceptions, though.  You may obtain additional separate coverage on multiple accounts, but only if you have different ownership interests or rights in different types of accounts and you properly complete account forms and applications.  For example, if you have a regular share account and an Individual Retirement Account (IRA) at the same credit union, the regular share account is insured up to $250,000 and the IRA is separately insured up to $250,000. 

However, if you have a regular share account, a share certificate, and a share draft account, all in your own name, you will not have additional coverage.  Those accounts will be added together and insured up to $250,000 as your individual account.  Additionally, shares denominated in foreign currencies are insured as outlined in NCUA Rules and Regulations. 

Coverdell Education Saving Accounts, formerly education IRAs, are insured as irrevocable trust accounts and will be added to a member’s other irrevocable trust accounts and insured up to the SMSIA. Roth IRAs will be added together with traditional IRAs and insured up to $250,000. A Keoghs account is separately insured up to $250,000.

Additional coverage is available on revocable trust or payable on death accounts. You can now name a natural person, charitable organization or other non-profit entity under the Internal Revenue Code of 1986 as a beneficiary to get separate coverage. Previously, beneficiaries had to be a spouse, child, grandchild, parent or sibling. The rules on joint accounts have been simplified.  A co-owner’s interest in all joint accounts in the same credit union will be added together and insured up to the SMSIA.

Courtesy: NCUA, BVS

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