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NCUA and the Share Insurance Fund – How and how much does the share insurance cover?

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Whether FDIC or credit NCUA insured, the magic number is $250,000. The insurance features are practically the same though NCUA references “shares” and FDIC references “deposits”. I am a Credit Union CEO so I’ll use the credit union language. National Credit Union Share Insurance Fund (NCUSIF) managed by the National Credit Union Administration (NCUA), a federal government agency, insures the credit union member shares to at least $250,000 at each NCUA insured credit union. Sometimes, it is a mystery how it works. It can be understood to be a maximum coverage, however, it can cover much more than that for each individual. There are several ways to increase the share insurance coverage through the use of different types of accounts.

Let’s cover the simple ones first. If you own individual accounts without any beneficiaries regardless of the number of accounts, you are covered up to $250,000. If you own joint accounts without any beneficiaries regardless of the number of accounts, you have an additional $250,000 for your equal share of the accounts (meaning if one account is owned by 3 joint owners, your share would be 1/3 of the balance of that account). Again, these coverages are for accounts without beneficiaries. If you own an IRA at the credit union you are covered up to another $250,000 for each individual, regardless of number of accounts. So “Mary” has her own savings account with $300,000 and another savings account owned jointly with her two siblings John and Paul worth $300,000. She also has 6 different IRA accounts totaling $500,000. Mary’s savings account is covered at the $250,000 max, her third of the account with her siblings is covered at $100,000, and her IRA’s are also covered at an additional $250,000 max. Mary has exposure for $50,000 of her savings, $250,000 of exposure on her IRA, and unknown exposure on $200,000 her joint account because we don’t know the details of her joint owners.

Now, for a bit more complicated stuff…In addition to the above individual and joint account coverages, you are also covered separately up to $250,000 for accounts with Payable on Death (POD) or revocable trust accounts. For example, if Mary had a $500,000 POD account with her children as beneficial payees, Mike and Jane, each payee and the grantor relationship has a coverage of up to $250,000. For this example, the grantor/payee relationship of Mary and Mike has a coverage of $250,000, and the relationship of Mary and Jane has a separate coverage of $250,000. That account has $0 exposure. Again, all these coverages are regardless of the number of accounts and each relationship must have equal benefit.

On the example above, if we add an additional POD owner account, for example, Mary and her husband Peter valued at $500,000 with Mike and Jane as payees, each grantor/payee relationship, Mary and Mike, Mary and Jane, Peter and Mike, and Peter and Jane, would have coverage as well. Now, the caveat is that the two relationships, Mary and Mike, and Mary and Jane, would have been maximized at $250,000 with the previous balances, but the two new relationships, Peter and Mike, and Peter and Jane, would have separate coverages for Peter’s half of the joint account equaling $125,000 for each child and $250,000 of this account would be exposed. Thank goodness there is a calculator for this.

In addition to the above, if you have any business accounts (different tax ID number than your social security number), you have additional coverage of up to $250,000. These could be any other business types, partnership, LLC, LLP, or corporations, etc., except for sole-proprietorship. For sole proprietorship business accounts, these count towards your individual accounts.

These coverages are just a few examples of how NCUA provides insurance for shares at a NCUA insured credit union. On the other side, Federal Deposit Insurance Corporation (FDIC) should have parity in its coverages. Now, be careful to note that not all credit unions are insured by NCUA. You can find out if a credit union is insured or not by going to http://mapping.ncua.gov/ResearchCreditUnion.aspx and find a credit union’s name in the NCUA list. Make sure your credit union is insured by NCUA. You can also use the insurance calculator by going to https://www.mycreditunion.gov/estimator/Pages/calculator.aspx and try your scenario. FDIC has similar calculator, Electronic Deposit Insurance Estimator (EDIE), which can be found by going to https://www.fdic.gov/edie/calculator.html. Please go online to find more detailed information.

NCUA – https://www.ncua.gov/Legal/GuidesEtc/GuidesManuals/NCUAHowYourAcctInsured.pdf
FDIC – https://www.fdic.gov/deposit/deposits/

 

Paul Yang, President/CEO
Credit Union 1

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