WHAT IS Insured Financial Institution

An insured financial institution is any bank or savings institution covered by some form of deposit insurance.

BREAKING DOWN Insured Financial Institution

State and national banks, must be insured financial institutions, required by law to have Federal Deposit Insurance Corporation (FDIC) coverage. The Deposit Insurance Fund insures the deposits and protects the depositors of insured banks and resolves failed banks. Credit unions are covered by the National Credit Union Share Insurance Fund, or NCUSIF.

FDIC coverage

Checking accounts, savings accounts, Certificates of Deposit, or CDs, and money market accounts are generally fully covered by FDIC. Coverage extends to trust accounts and Individual Retirement Accounts, or IRAs, but only those portions composed of the accounts listed previously. FDIC insurance does not cover products such as mutual funds, annuities, life insurance policies, stocks, or bonds. The contents of safe-deposit boxes are also not included in FDIC coverage. Cashier's checks and money orders issued by the failed bank remain fully covered by FDIC.

DIF coverage

The DIF is reduced by loss provisions associated with failed banks and by FDIC operating expenses. The FDIC maintains the DIF by assessing depository institutions an insurance premium. The amount each institution is assessed is based both on the balance of insured deposits as well as on the degree of risk the institution poses to the insurance fund. When a bank becomes insolvent, the FDIC is appointed receiver of the failed institution. As receiver, the FDIC takes title to the failed institution's assets and liquidates them; and as deposit insurer pays off the failed institution's deposit liabilities or pays another institution to assume them. Because the failed institution's assets are almost always worth less than its deposit obligations, a bank failure results in a loss to the DIF.

NCUSIF coverage

The National Credit Union Administration, or NCUA, is the independent agency that administers the  NCUSIF. Like the FDIC's Deposit Insurance Fund, the NCUSIF is a federal insurance fund backed by the full faith and credit of the United States government. The NCUSIF protects members’ accounts in federally insured credit unions​​​​​​​, in the unlikely event of a credit union failure. The NCUSIF covers the balance of each member’s account, up to $250,000, including principal and posted dividends through the date of the failure. NCUA does not insure money invested in stocks, bonds, mutual funds, life insurance policies, annuities or municipal securities, even if these investment or insurance products are sold at a federally insured credit union. Credit unions often provide these services to their members through third parties, and the investment and insurance products are not insured by the NCUSIF