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Share Insurance: Common Misunderstandings

Thu, Oct 13, 2016

Columbia, Maryland

Common misunderstandings regarding NCUA Share Insurance affect all ownership categories:

  1. Many members do not realize that placing funds in different types of deposit accounts (for example, share, share draft, share certificates) does not provide for separate insurance coverage. All types of deposit accounts that a depositor has in the same ownership category are combined and insured up to the insurance limit for that ownership category. 

    For example: if Mary Jones has three accounts in her name alone at a credit union – a share account, a share draft account, and a share certificate – the funds in all three accounts will be added together and insured up to $250,000 in total, NOT $750,000.
  2. Many members do not know that outstanding official items such as interest and cashiers checks are deposits that will be combined with their other deposits in the same ownership category when calculating insurance coverage.

    For example: John Smith has a single account in his name alone with a credit union for $250,000. Every month he receives a check for $200 representing the interest earned on this account. Until this check is presented and has cleared, John Smith has $250,200 in the single account category. If his credit union should fail and this check is outstanding, he will be uninsured for $200.
  3. Members may not realize when they have deposit accounts that fail to meet the requirements for insurance coverage in different ownership categories. There are specific requirements that must be met to qualify for share insurance coverage under each of the different ownership categories. When the requirements for a specific ownership category are not met, the insurance coverage will change to a different ownership category, most often the single account category.

Common misunderstandings about single accounts

  1. Owners of sole proprietorships often do not realize that deposit accounts belonging to the sole proprietorship are added together with any other single accounts they may have in their name alone at the same credit union and the combined total is insured to a maximum of $250,000.
  2. Some estate executors are under the mistaken impression that accounts held in the name of a decedent or by the executor or administrator of a decedent’s estate are fully insured regardless of the deposit amount. In fact, such accounts are insured up to a maximum of $250,000 only, and insured in the name of the decedent.