FDIC and NCUA Coverage

Investing money in excess of the Federal Deposit Insurance Corporation ("FDIC") limits - or National Credit Union Administration ("NCUA") limits for credit unions – in a single CD defies the very point of having a savings account, and exposes you to unnecessary risks. There are so many FDIC insured banks with competitive savings and short-term CD rates that all but the extremely wealthy can divide their money in $250,000 increments in a way to avoid overexposing themselves to a bank failure. (The extremely wealthy – those with tens of millions of dollars in cash - should look at CDARS and other cash allocation programs, as well as separate insurance policies, to divide up their cash in manners that insure them against bank failures).

What is covered by the FDIC?

FDIC insurance covers bank accounts, such as checking accounts, savings accounts and Certificates of Deposit. It does not cover investment products that you may purchase from a bank, such a mutual funds, commodities, annuities, or life insurance.

The attraction of FDIC insurance is that it is backed by the full faith and credit of the US. As long as you stay within limits, every penny in your bank accounts will be deposited in an account with your name on it the day after the bank becomes insolvent.

To be fully insured, you must make sure that your deposits follow the FDIC guidelines and limits. These guidelines are based on different account ownership categories, with up to $250,000 of coverage allowed for each category of account ownership you have in one bank, not by how many accounts you have in that bank. It is important to understand that if you have a CD with $250,000, and a savings account or a checking account with $250,000 at the same bank in the same ownership category, you are unnecessarily exposed to a potential default of the bank to the tune of $250,000.

The account ownership categories are:

A. Single Accounts - A single account is a deposit held in one person’s name only or held in account for one person only.

B. Certain Retirement Accounts - This category includes Traditional IRAs, Roth IRAs, SEP-IRAs, Simple IRAs and self-directed defined contribution plans

C. Joint Accounts - A joint account is a deposit owned by two or more people.

D. Revocable Trust Accounts - The owner of a revocable trust account is insured up to $250,000 for each unique beneficiary, provided the revocable trust account does not have more than five beneficiaries.  Effective April 1, 2024, if a trust account has more than five beneficiaries, the trust is insured only to an aggregate total of $1.25 million.

E. Irrevocable Trust Accounts - Irrevocable trust accounts are held in connection with a trust in which the owner gives up all power to cancel or change the trust.  These are insured by the FDIC in the same manner and to the same limits as revocable trust accounts.

F. Employee Benefit Plan Accounts - These are a deposit of a pension plan, defined benefit plan or other employee benefit plan that is not self-directed.

G. Corporation/Partnership/Unincorporated Association Accounts - Deposits owned by corporations, partnerships, and unincorporated associations, including for-profit and not-for-profit organizations.

H. Public Unit accounts – Deposits with the United States government, including federal agencies, any state, county, municipality (or a political subdivision of any state, county, or municipality), the District of Columbia, Puerto Rico and other government possessions and territories or an Indian tribe

If you have specific questions about your own circumstances you should use the FDIC’s Electronic Deposit Insurance Estimator.

What is covered by the NCUA?

The National Credit Union Administration provides insurance to federally chartered credit union depositors in a manner that is very similar, though not identical, to the FDIC. State chartered credit unions may also be protected so long as they display the NCUA logo on their website and in their facilities. If you think you may be in excess of NCUA limits at a single credit union, you should download and read the NCUA’s insurance brochure.

All banks listed on RatesAndInfo.com are insured by the FDIC.

RatesAndInfo.com provide information on state chartered credit unions that may not be insured by the NCUA (this information can be found on the credit union's information page by clicking the Overview tab).

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