Insured Financial Institution

What Is an Insured Financial Institution?

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

Key Takeaways

  • An insured financial institution is any bank or savings institution covered by some form of deposit insurance.
  • Federal deposit insurance is mandatory for all federally-chartered banks and savings institutions.
  • The National Credit Union Administration (NCUSIF) is a federal program similar to the FDIC that covers federally insured credit unions.

Understanding Insured Financial Institutions

Federally-chartered banks and savings institutions 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 (NCUSIF).

Federal Deposit Insurance Corporation (FDIC)

Checking accounts, savings accounts, certificates of deposit (CDs), and money market accounts are generally fully covered by the FDIC. Coverage extends to trust accounts and individual retirement accounts (IRAs), but only those portions composed of checking or savings accounts, CDs, or money market accounts.

The FDIC insurance does not cover products such as mutual funds, annuities, life insurance policies, stocks, ETFs, or bonds. The contents of safe-deposit boxes are also not included in FDIC coverage. Cashier's checks and money orders issued by a failed bank remain fully covered by FDIC. The FDIC insures up to $250,000 per person.

Depositors Insurance Fund (DIF)

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' insurance premiums. 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.

The FDIC is required to pay insured depositors "as soon as possible." This usually takes a few days and the depositor receives either a check or a new account at a different institution.

As the receiver, the FDIC takes title to the failed institution's assets and liquidates them. As the deposit insurer, it 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.

National Credit Union Administration (NCUSIF)

The National Credit Union Administration, or NCUA, is the independent agency that administers the NCUSIF (National Credit Union Share Insurance Fund). 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, ETFs, 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.

What Is an FDIC Insured Financial Institution?

An FDIC insured financial institution is one that is insured by the Federal Deposit Insurance Corporation. This means that the FDIC protects a depositor's funds at the bank in the event that the bank fails. Each person is insured up to $250,000 by the FDIC. The FDIC is funded by premiums charged to member banks. It is not taxpayer money.

How Do I Find Out if a Company Is FDIC Insured?

To find out if a company is FDIC insured, you can call the FDIC at 1-877-275-3342 or use its Bank Find website. You can also check with the specific institution itself.

What Banks Are Not Insured by the FDIC?

The FDIC does not ensure credit unions. Credit unions are insured by the National Credit Union Administration (NCUA). They are insured up to the same amount that the FDIC insures bank accounts: $250,000.

The Bottom Line

An insured financial institution is one that is covered by deposit insurance. In the U.S., the FDIC insures deposits at banks and the NCUA at credit unions, both up to $250,000 per person. This ensures that customers' money is protected in case the bank that holds their money goes bankrupt or can no longer honor its obligations to depositors.

Article Sources
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  1. Connecticut's Official State Website. "State of Connecticut Department of Banking."

  2. National Credit Union Administration. "Share Insurance Fund Overview."

  3. Federal Deposit Insurance Corporation. "Deposit Insurance Fund."

  4. Federal Deposit Insurance Corporation. "Receivership Management Program."

  5. Federal Deposit Insurance Corporation. "When a Bank Fails - Facts for Depositors, Creditors, and Borrowers."

  6. Federal Deposit Insurance Corporation. "Understanding the Components of Bank Failure Resolution Costs."

  7. National Credit Union Administration. "How Your Accounts Are Federally Insured," Page 1-2.

  8. "Share Insurance Estimator."

  9. Federal Deposit Insurance Corporation. "BankFind Suite: Find Institutions by Name & Location."

  10. Federal Deposit Insurance Corporation. "FDIC Consumer News: How Does the FDIC Protect Consumers?"

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