Legal Definitions - National Credit Union Share Insurance Fund (NCUSIF)

The National Credit Union Share Insurance Fund (NCUSIF) is a federal insurance program designed to protect the money members deposit into federally insured credit unions. Established in 1970 and managed by the National Credit Union Administration (NCUA), its primary role is to safeguard credit union members from financial loss if their credit union were to fail. Essentially, it acts as a safety net, ensuring that your savings are protected.

The NCUSIF operates by insuring various types of accounts, including regular savings (shares), checking (share drafts), money market accounts, and certificates of deposit (CDs). This protection is comprehensive:

• It insures individual member accounts up to $250,000 per depositor for each federally insured credit union.
• For joint accounts, each co-owner is separately insured up to $250,000 for their portion of the funds.
• Certain retirement accounts, like Traditional and Roth IRAs, and specialized accounts like KEOGH plans, receive separate insurance coverage up to $250,000 in total for each type of account at a single credit union.
• Trust accounts (both revocable and irrevocable) can also receive significant coverage, potentially up to $250,000 per unique beneficiary.

It's important to note that the NCUSIF does not cover investments such as mutual funds, stocks, bonds, life insurance policies, or annuities, even if these products are offered through an affiliated entity of the credit union. These types of investments carry their own risks and are not considered deposits.

The NCUSIF is backed by the full faith and credit of the United States government, meaning it has the complete financial support of the U.S. Treasury. This strong backing provides an exceptionally high level of security, and historically, no member has ever lost money in an NCUSIF-insured account due to a credit union failure.

Examples of the National Credit Union Share Insurance Fund (NCUSIF) in Action:

• Individual Account Protection:

  Imagine Sarah has a checking account with $15,000 and a savings account with $75,000 at her local credit union, "Community First CU." If Community First CU unexpectedly experiences severe financial difficulties and is forced to close, Sarah would not lose her money. The NCUSIF would step in to ensure she receives her full $90,000 back, as her total deposits are well within the $250,000 insurance limit for individual accounts.

  This illustrates how the NCUSIF protects an individual's deposits, ensuring they are reimbursed up to the standard coverage limit if their credit union fails.

• Multiple Ownership Categories:

  David and Maria are married and have several accounts at "Prosperity Credit Union." They have a joint savings account with $300,000, David has an individual Roth IRA with $150,000, and Maria has a Traditional IRA with $100,000. If Prosperity Credit Union were to fail, their funds would be fully protected. The NCUSIF would cover David and Maria's joint account up to $250,000 for each of them (totaling $500,000 for the joint account, but since they only have $300k, it's fully covered). David's Roth IRA would be separately insured for $150,000, and Maria's Traditional IRA for $100,000. All their funds are within the respective coverage limits for each ownership category.

  This example demonstrates how the NCUSIF provides separate insurance coverage for different types of accounts and ownership structures, allowing members to have more than $250,000 protected at a single institution.

• Uninsured Investments:

  Mr. Henderson has $200,000 in a certificate of deposit (CD) at "Secure Savings Credit Union." He also invested an additional $50,000 in a mutual fund offered through the credit union's affiliated investment services department. If Secure Savings Credit Union were to fail, Mr. Henderson's $200,000 CD would be fully protected by the NCUSIF because it is a deposit. However, his $50,000 investment in the mutual fund would not be covered by the NCUSIF, as mutual funds are investment products, not insured deposits, and carry their own market risks.

  This scenario highlights the crucial distinction between insured deposits (like CDs) and uninsured investment products, even when both are accessed through the same financial institution.