Most people know that if they have money in a savings account, a certificate of deposit, or a checking account at a bank they are protected in the event that their bank fails by the Federal Deposit Insurance Corporation (FDIC), but what about account holders at credit unions—is their money FDIC insured as well?
It turns out that a different governing body oversees credit unions—the National Credit Union Association, more commonly known as the NCUA. The NCUA has an insurance fund setup which is very comparable to the FDIC’s deposit insurance fund. NCUA member credit unions pay fees to the National Credit Union Share Insurance Fund (NCUSIF) and in-tern, that fund protects credit union members’ deposit in the event that the credit union goes belly up.
The NCUSIF was established in 1970 by National Credit Union Association, which is part of the federal government. Much like the FDIC’s insurance fund, the National Credit Union Association’s Share Insurance Fund is backed by the full faith and credit of the United States Government, meaning as long as the US government is around, depositors at credit unions are going to get their money. Typically the NCUSIF will pay out affected customers within 3 days of a credit union’s failure.
Specifically, the NCUA insures up to $250,000 in coverage for an individual’s accounts. Insured accounts include regular shares, share drafts (checking accounts), money market accounts and share certificates. Members that have individual retirement accounts (both ROTH and traditional IRA’s) and KEOGH retirement accounts are also insured up to $250,000 at each credit union.
It should be noted that your retirement account funds’ insurance is separate from that of your regular credit union account, so that if you have $250,000 in your regular accounts and $250,000 in your retirement accounts, you will be insured up to $500,000. This will help you stretch your coverage and further protect you in the event of a credit union failure. You can also protect yourself by spreading your money across multiple credit unions or banks since each institution will have their own insurance policy from the FDIC or the NCUA.