Credit unions and bank accounts are among the safest places to keep your money. But what happens when financial institutions fall on hard times, as they did during the 2007–2008 financial crisis? During that period, numerous banks and credit unions failed as a result of bad investments. Fortunately, account holders are often protected by deposit insurance.
What Is NCUSIF Insurance?
The National Credit Union Share Insurance Fund (NCUSIF) is a government-backed insurance fund for credit union deposits. It functions through the National Credit Union Administration (NCUA), which is a U.S. government agency. Like FDIC insurance, NCUSIF covers up to $250,000 per account holder per institution. NCUSIF insurance is available in federally insured credit unions.
For example, assume you have $5,000 in savings, and there’s a bank failure at your credit union. The good news, assuming your funds are insured, is that you still have that money. The process of restoring funds may take a few days, but in many cases, you’ll never even notice the event. In some instances, another institution takes over your accounts and loans, but the experience should be relatively seamless—and certainly much better than losing all of your money.
NCUSIF vs. FDIC
When you deposit your money into an account at a standard bank with deposit insurance, your funds are typically covered by the Federal Deposit Insurance Corporation (FDIC). That coverage is very similar to (and just as safe as) that provided by the NCUSIF.
Coverage Details
You might buy or invest in additional products inside the walls of your credit union, but some of those products don’t benefit from NCUSIF protection. For example, stocks, bonds, mutual funds (including money market funds), ETFs, and the contents of your safe deposit box are not covered by NCUSIF.
You can lose money with those products and services, and there’s no government guarantee. Other products might also be excluded. NCUSIF insurance is only available at federally insured credit unions administered by the National Credit Union Administration (NCUA). Other types of credit unions exist, some of which use private insurance, which isn’t necessarily a bad thing, but it’s not as safe as NCUSIF coverage.
Insured Amounts
Understanding how much coverage you have can be tricky. To be safe, assume you’re covered up to $250,000 per federally insured credit union. If you have more than that, you can keep the excess in a different credit union.But you might not need to use more than one credit union. The $250,000 limit is per account holder (or “registration,” if you prefer), and you might have accounts titled in several different names:
Each of those account titles gets its own $250,000 limit, so you could potentially have $1 million of coverage at one credit union. To verify how much coverage you have, speak with a credit union employee and verify your details with the NCUA’s share insurance estimator, an online calculator for determining your benefits.
Cost of Insurance
NCUSIF insurance is “free.” You don’t pay a separate fee for coverage, and you don’t need to sign up. To be more precise, deposit accounts at federally insured credit unions automatically include coverage (other accounts might not be insured, as described above).
The credit union pays the cost of deposit insurance. Since you, as an account holder, are a partial owner of the credit union, you indirectly pay the fee. For more on that, find out how banks and credit unions make money.
Credit unions contribute to the fund by premiums into the Share Insurance Fund. The NCUA can also collect additional premiums if the need arises.
If for some reason, the fund runs dry, it’s backed by the full faith and credit of the U.S. government. In other words, the U.S. Treasury could provide funds to reimburse account holders against losses.