What Does Bank Insurance Mean for You and Your Money?

Bank insurance is an important factor to consider when it comes to protecting your money. It can provide peace of mind and protect you from financial losses if something should happen to your bank. In this blog post, we will discuss what bank insurance is, why it’s important, and how it can help you protect your money.

FDIC Insurance

FDIC Insurance is a form of protection offered by the Federal Deposit Insurance Corporation (FDIC) to customers with deposits in banks or other financial institutions. The FDIC insures all deposits up to $250,000 per account, per bank. If an FDIC-insured bank fails, customers are guaranteed to receive their insured deposits back in full.

To be eligible for FDIC insurance, customers must deposit funds into an account at an FDIC-insured financial institution. The FDIC will insure deposits up to the maximum amount allowed by law ($250,000) regardless of the number of accounts held at a single institution. All standard deposit accounts, such as checking, savings, and money market accounts, are eligible for FDIC insurance. Other accounts such as certificates of deposit (CDs), annuities, and trust accounts may also be eligible for coverage if certain criteria are met. 

The FDIC encourages customers to review their account balances regularly and make sure they are aware of the maximum FDIC insurance limit of $250,000 per account, per bank. This way they can spread their funds across multiple institutions or accounts in order to maximize the amount of funds covered by FDIC insurance. Customers should also check the FDIC's website to verify that their financial institution is indeed FDIC insured.

Share Insurance

Share insurance is a type of insurance that provides additional protection for deposits held in credit unions. It is a specific form of deposit insurance, like the FDIC insurance offered at banks, that guarantees to credit union members that their deposits are safe in the event of a credit union failure. Share insurance is provided by the National Credit Union Administration (NCUA), a government agency created to promote and protect the interests of credit union members.

Share insurance coverage is available for up to $250,000 per depositor, per credit union. This limit applies to all accounts held at the same credit union, regardless of ownership type. Share insurance protects both share accounts (savings) and share draft accounts (checking) held at a credit union. It also covers other types of deposits, including certificates of deposit, money market accounts, and other share-type accounts. 

Share insurance does not cover stocks, bonds, mutual funds, or any other investments that may be offered by the credit union. Additionally, if you have more than $250,000 in deposits with a credit union, your excess deposits will not be insured by the NCUA. To ensure that all of your deposits are protected, you should consider spreading out your deposits among multiple credit unions or other financial institutions. 

It is important to note that while share insurance provides an extra layer of protection for credit union deposits, it is not a replacement for thorough research and due diligence when selecting a financial institution. Before opening an account at a credit union, it is important to evaluate its financial health and the services it provides.

Credit Union Insurance

Credit unions, while similar to banks in many ways, are not insured by the FDIC. Instead, they are insured by the National Credit Union Share Insurance Fund (NCUSIF). The NCUSIF is backed by the full faith and credit of the United States government, just like the FDIC.

This insurance fund protects the deposits of credit union members up to $250,000 per account per ownership category. This means that if your credit union becomes insolvent, your deposits are protected and you will receive a payment from the NCUSIF for the full amount of your deposit up to $250,000. This insurance protection covers individual retirement accounts (IRAs) as well as non-retirement accounts.

Additionally, some credit unions may participate in private insurance programs in addition to the NCUSIF. These private insurance programs provide coverage for deposits that exceed $250,000 per ownership category. It’s important to note that the private insurance only covers deposits in excess of the $250,000 provided by the NCUSIF.

It’s also worth noting that credit unions are generally considered safer than banks because they are often more conservatively run and have fewer risks on their balance sheet. That said, all financial institutions can fail, so it’s important to check with your credit union to make sure your deposits are covered under the NCUSIF or any other private insurance programs they may offer.

How to Insure Your Deposits

When it comes to safeguarding your hard-earned money, insuring your deposits can provide added security and peace of mind. There are a variety of insurance options available to individuals, businesses and financial institutions. Depending on where you keep your money and what type of accounts you have, different types of insurance may be offered.

The Federal Deposit Insurance Corporation (FDIC) is an independent government agency that insures most types of deposits at U.S. banks, up to $250,000 per account. This includes savings accounts, certificates of deposit (CDs), checking accounts, and money market accounts. All FDIC-insured banks must display a sign that says "FDIC Insured" in their lobbies or online.

Credit unions also offer an additional layer of protection for deposits, known as share insurance. This insurance is provided by the National Credit Union Share Insurance Fund (NCUSIF). The NCUSIF insures deposits up to $250,000, the same as FDIC insurance. All federally insured credit unions must display the NCUSIF logo at their branches or online.

Credit Union Insurance:

State-chartered credit unions often offer a different form of insurance known as state share insurance. The level of coverage offered through state share insurance varies from state to state. In some cases, it can cover up to $500,000 per account. Credit unions that offer state share insurance must display signs in their lobbies or online that say “Insured by State Share Insurance”.

In addition to these federal and state insurance programs, there are other ways to protect your deposits. Some banks may offer additional deposit insurance through private companies. For example, Bank of America offers an extra layer of coverage through its PrivatePass Deposit Insurance Program.

No matter where you keep your money, it's important to understand the different types of deposit insurance and make sure your funds are adequately protected. If you're unsure about your coverage, contact your bank or credit union for more information.