How NCUA Insurance Works

insurance policy paper next to magnifying glass and glasses

The National Credit Union Administration (NCUA) charters and regulates federal credit unions, and insures credit union deposit accounts. With NCUA protection, even if your NCUA-insured credit union fails, deposits you've made into your account are protected up to $250,000 per person and ownership category.

If you don't have a credit union account but would like financial services with a personal touch, potentially higher investment returns and lower fees than a traditional bank, consider joining a credit union. Credit unions are not-for-profit, member-owned organizations that provide many of the same services banks do and offer safeguards set and maintained by the NCUA. Keep reading to learn more about how NCUA insurance works.

What Is the NCUA?

The NCUA is an independent federal agency that oversees the National Credit Union Share Insurance Fund (NCUSIF). This federal insurance fund is backed by the full faith and credit of the U.S. government.

Deposits in federal credit unions are insured by the NCUA up to $250,000 per member-owner and ownership category. Credit unions chartered and regulated by state agencies may also be insured by the NCUA. Overall, some 98% of all credit unions are NCUA-insured.

The Federal Deposit Insurance Corporation (FDIC) is a federal agency that performs the same function as the NCUA, but for banks. The FDIC regulates banks and manages the Federal Deposit Insurance Fund, which is used to guarantee deposits up to $250,000 per person, per ownership category at FDIC-insured banks and savings associations. Should your FDIC-insured bank fail, you won't lose your insured deposits.

What Accounts Qualify for NCUA Insurance?

NCUA deposit insurance takes effect automatically when you open a covered account. But because the NCUA doesn't insure all the financial products credit unions offer, it's important to understand what is covered and what isn't.

The following types of deposit accounts qualify for NCUA insurance:

  • Share draft accounts (checking accounts)
  • Share savings accounts
  • Money market deposit accounts
  • Certificate accounts (share certificates and CDs)
  • Individual Retirement Accounts (IRAs)

However, even if you buy them through a federally insured credit union, stocks, bonds, mutual funds, annuities, life insurance policies, municipal securities and safe deposit boxes are not NCUA-insured.

NCUA Coverage Limits

In addition to the type of account, the ownership category of an account is also a factor in the amount of NCUA insurance you have. NCUA coverage is capped at $250,000 per insured credit union, per member-owner, per account ownership category. NCUA-insured accounts fall into these ownership categories:

  • Single accounts (owned by one person)
  • Joint accounts (owned by two or more people)
  • Certain retirement accounts
  • Revocable trust accounts
  • Irrevocable trust accounts
  • Employee benefit plan accounts

Generally, all accounts in the same ownership category owned by the same individual at the same credit union are added together and that amount is insured up to $250,000. Suppose you're fortunate enough to have a joint checking account with your spouse with a balance of $500,000. Because each account in the same category qualifies for $250,000 per member-owner, each of you receives $250,000 in coverage, so the money is fully insured.

Now suppose you have a single checking account and a single savings account, each with a balance of $250,000, for a total of $500,000. These are different types of accounts, but since both are the same account category (single), only $250,000 of your money is insured.

Figuring out if your credit union deposits are covered can be confusing. To help, the NCUA has a tool you can use to determine whether your money is fully insured. If your deposits exceed the limits of NCUA coverage, you can protect yourself by moving some deposits to a federally insured bank or to a different NCUA-insured credit union.

Protect Your Finances

Knowing your credit union deposit accounts are protected by NCUA insurance can give you peace of mind. Managing your accounts wisely can help protect your credit too. Although credit union transactions and account balances aren't part of your credit report, unpaid overdrafts, penalties and fees could land your account in collections and lower your credit score. You can help safeguard your credit by checking your credit report and credit scores regularly, which you can do for free through Experian. Also consider signing up for Experian's free credit monitoring service to receive alerts of changes to your credit report.