FDIC / NCUA Insurance For CDs

FDIC and NCUA insurance for CDs protect the deposits made by investors. FDIC (Federal Deposit Insurance Corporation) insurance applies to banks and savings associations for all deposit accounts, including CDs. NCUA (National Credit Union Administration) insurance is similar to FDIC insurance, except that it is for the protection of credit union deposits.

Who offers this insurance?

Any federally or nationally chartered bank must carry FDIC insurance.  For other banks, its the states that decide whether or not a bank must carry FDIC insurance, and most if not all currently require it.  This, combined with the fact that investors generally prefer the security of FDIC insurance, makes it so the overwhelming majority of banks are FDIC insured.

Federal credit unions are automatically covered by NCUA insurance.

For other credit unions, NCUA insurance is a choice and not mandatory. FDIC and NCUA insurance are both as reliable as each other, thanks to the fact that they are backed by the United States Government. If a bank fails, FDIC insurance takes effect rapidly, often the day after failure, to open a new account with another institution for each investor, or to issue a check to each investor to reimburse the investor according to the limits below.

How much insurance can you get for your CDs?

Both FDIC and NCUA insurance extend to a maximum of $250,000 per depositor per institution. This maximum covers both initial capital and accrued interest. If you have more than $250,000 at the same institution then the overage will not qualify for either FDIC or NCUA insurance.

There is a great tool to see how much money you are covered for on the FDIC’s website, which you can find here.

So, what options do you have if your total deposits (whether for CDs or for other investments) exceed $250,000?

1.  You can open different accounts for CDs with different financial institutions (each covered by the FDIC, for example), with the total amount of your deposits with any one institution remaining under the $250,000 limit. In that case, each account benefits from insurance protection.
2. Money held in retirement accounts have separate coverage from any individual or joint accounts held at the same institutions, and are also insured up to $250,000.

If you have such a large amount of money that it would be inconvenient to personally open accounts at multiple institutions, you may want to use the Certificate of Deposit Account Registry Services or CDARS for short.  This service distributes your deposits over a network of banks and savings associations around the Unites States for you, in such a way as to achieve FDIC coverage for each distributed portion. CARDS is a private service for which a fee is payable.

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