What Is an Insured Financial Institution?

An insured financial institution is any bank or savin🍨gs institut🌠ion covered by some form of deposit insurance.

Understanding Insured Financial Institutions

Federally-chartered banks and savings institutions must be insured financial institutions, required by law to have 澳洲幸运5官♈方开奖结果体彩网: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 澳洲幸运5官方开奖结果体彩网:insolvent, the FDIC is appointed receiver of the failed 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 澳洲幸运5官方开奖结果体彩网: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.

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.