ESI - Little Known Deposit Insurance for Credit Unions

Some credit unions offer ESI for deposit insurance. ESI is short for Excess Share Insurance. As the name suggests, it only covers deposits that exceed the level of coverage provided by the credit union's primary share insurer. For most cases the primary share insurer is the NCUA. In some states, it can be ASI.

An important thing to note about ESI is that it's provided by the private company, American Share Insurance. It's the same company that provides ASI coverage. In 2009 I reviewed ASI when a Texas credit union tried to replace NCUA coverage with ASI coverage.

As I described in my 2009 ASI review, there are many concerns that ASI coverage is inferior to NCUA coverage. For those not familiar with the NCUA, it stands for the National Credit Union Administration. And just like the FDIC which insures bank deposits, NCUA insurance is backed by the full faith and credit of the U.S. government. That is not the case for ASI. On ASI's website, they clearly state that "Members' accounts are not insured or guaranteed by any government or government-sponsored agency."

The ASI has an overview of Excess Share Insurance. Here's a brief description of the coverage:

Members exceeding the maximum level of insurance coverage provided by the NCUA may then be insured up to an additional $250,000 with ASI’s excess share insurance.

If your credit union has both NCUA and ESI coverage and you don't trust private deposit insurance, you can keep your deposits under the NCUA limits and forget about ESI. In this case the downside would be that your credit union is paying for insurance coverage that you're not using. That extra money could be going into higher deposit rates instead of insurance premiums. However, I would guess the premiums are small compared to primary insurance.

Other Private Deposit Insurance

In addition to ASI and ESI, there's another credit union private deposit insurer, but it's only available in Massachusetts. It's called Massachusetts Credit Union Share Insurance Corporation (MSIC), and it fully insures excess deposits above the federal insurance limit. Unlike ESI, the coverage isn't capped at $250K. It should be noted that MSIC only supplements the NCUA coverage.

Massachusetts also has excess deposit insurance for banks. One is the Deposits Insurance Fund (DIF) for Massachusetts-chartered savings banks, and the other is the Share Insurance Fund (SIF) for co-operative banks in Massachusetts. There are some banks like Salem Five Cents Savings Bank which allow people from any state to open accounts that will be fully insured by FDIC and DIF. The bank's internet division Salem Five Direct offers an internet savings account that pays 1.00% APY on balances up to $1 million (as of 9/28/2011).

ASI, ESI, MSCI, DIF and SIF are all of the private deposit insurers in the nation that I'm aware of. If you know of others, please leave a comment.

Maximizing Your Federal Deposit Insurance

As I described in my post Maximizing Your FDIC Coverage with Beneficiaries, there are many ways to federally insure over $250K in deposits at one bank or credit union. If you do go over $250K, you have to be careful to ensure your deposits meet the FDIC or NCUA requirements.