Insurance Funds

• CDs and other deposit accounts are protected by two national insurance funds: the Federal Deposit Insurance Corporation and the National Credit Union Administration. Both of these entities were created at the behest of Congress, and enjoy full federal backing. The FDIC insures deposits held by banks, while the NCUA insures funds held at credit unions. Some banks and credit unions are state-chartered rather than nationally chartered, and state-chartered financial institutions are not always federally insured.
  
  

Coverage

• The FDIC and NCUA can change insurance coverage levels, and tend to do so to combat the effects of inflation. As of 2011, both entities provide $250,000 of insurance coverage for every account holder at every covered financial institution. If you own a CD jointly with someone else, then you effectively have $500,000 of insurance coverage on that account. You get a further $250,000 of coverage for every pay-on-death beneficiary that you add to your deposit accounts. Funds held in an Individual Retirement Arrangement (IRA) CD are insured separately to a maximum of $250,000.
  
  

Brokered CDs

• Brokered CDs are bank CDs that you can buy through your investment broker and hold in a brokerage account. These CDs are FDIC insured and, as with regular bank CDs, the insurance works on a per-account owner, per-bank basis. This means that you could own 10 CDs and enjoy $2.5 million of insurance coverage if you bought the 10 CDs from 10 different banks, even if you held all of the CDs in the same brokerage account.
  
  

Considerations

• The FDIC guarantees your deposits up to $250,000 per bank; but this does not necessarily mean that you stand to lose your excess funds if the bank holding your CDs and other accounts goes bankrupt. The FDIC and NCUA assume control of the assets of failed institutions and attempt to broker deals to sell those assets to other banks and investors. If sufficient funds are raised, the FDIC and NCUA may have enough money to reimburse your losses above the $250,000 level. However, if you want to keep your funds safe, keep your deposits below the maximum insurance level at each bank.