Credit Union Insurance Policy Information
Credit Union Insurance. Credit unions are non-profit financial institutions owned by their members, who are often a group of people with a common interest such as membership in a trade union or alumni association. Credit unions were originally formed to provide low-interest loans to their members.
These members deposit money and have ongoing access to their funds through ATMs, checks, or electronic means. They have the right to close their accounts and withdraw or transfer their money to another financial institution.
Credit unions earn income from interest charged on loans, profits from investments, and transaction fees. They may offer financial planning or investment services. To maintain public confidence in the industry, credit unions are highly regulated at the federal and state level.
The regulations change frequently so additional operations may be added as permitted.
Many Americans are choosing credit unions for their financial needs over traditional banks. Unlike banks, which are owned by large corporations, credit unions are owned by the members of the institution. As such, whatever profits a credit union does make goes back to the institution itself to improve the services that their members receive, or the funds are invested in the community. Additionally, credit union members enjoy lower fees and better rates on savings than traditional financial institutions provide.
Despite the numerous benefits that credit unions offer, there are risks associated with this type of financial institution. Since they hold the money of their members, it's the job of a credit union to protect those funds. Despite the best efforts of credit union operators to provide exceptional services and to protect the interests of their members, unforeseen problems can arise.
Therefore, it's important that you take the necessary precautions to protect your credit union and the members it serves. What's the best way to do that? - By carrying the right type of credit union insurance coverage.
credit union insurance protects your member-owned business from lawsuits with rates as low as $67/mo. Get a fast quote and your certificate of insurance now.
Below are some answers to commonly asked credit union insurance questions:
- What Is Credit Union Insurance?
- How Much Does Credit Union Insurance Cost?
- Why Do Credit Unions Need Insurance?
- What Type Of Insurance Do Credit Unions Need?
- What Does Credit Union Insurance Cover & Pay For?
What Is Credit Union Insurance?
Credit Union business insurance is a type of insurance coverage specifically designed for credit unions. It offers protection against various risks and hazards that may impact the credit union's operations, such as cyber attacks, fraud, employee theft, data breaches, and natural disasters.
This insurance coverage helps credit unions manage their financial risks and protect their assets, as well as the assets of their members. It provides financial compensation in the event of losses or damages, allowing the credit union to continue its operations and serve its members.
How Much Does Credit Union Insurance Cost?
The average price of a standard $1,000,000/$2,000,000 General Liability Insurance policy for small credit unions ranges from $67 to $89 per month based on location, size, payroll, sales and experience.
Why Do Credit Unions Need Insurance?
When it comes to money, problems are always a possibility. A credit union could be robbed, for example, and members' money could be stolen. A fire could erupt, damaging the structure that the credit union operates out of.
A member could trip, fall, and suffer an injury while making a deposit. An employee could be injured while working. These are just some of the problems that could arise.
When unforeseen problems do arise, you will be held liable. Your liability means that you are responsible for covering the cost of any losses, damages, or injuries that may occur; the cost of which could be excessive.
To avoid having to pay for these expenses out of your own pocket, investing in the right type of credit union insurance is important.
What Type Of Insurance Do Credit Unions Need?
There are several forms of insurance coverage that a credit union should invest in. Examples of policies that these financial institutions should carry include the following:
- NCUA Insurance - This type of insurance is backed by the National Credit Union Administration (NCUA). The NCUA is associated with the federal government, but it is an independent agency. NCUA insured credit unions protect up to $250,000 of their members deposits. This type of insurance coverage is crucial, as it certifies that should anything go wrong with the deposits that are made in your financial institution - a theft, for example - those deposits will be protected by the federal government.
- Excess Insurance - With excess insurance, your members' deposits will be protected beyond the $250,000 that NCUA insurance offers. Should members have amounts that are higher than $250,000 deposited in your credit union, excess insurance will guarantee they are covered from losses above the NCUA limit.
- Commercial Property - In addition to protecting your members' money, it's also important to protect the commercial space that a credit union operates out of. Commercial property insurance protects the structure of the credit union, as well as the contents that are housed within it, such as inventory, supplies, and equipment. This type of policy provides protection against acts of nature, such as fires, storms, and fallen trees, as well as acts of vandalism, such as graffiti or broken windows.
- Commercial General Liability - If member or a vendor slips and falls on the credit union's property, or if someone claims that an employee of the credit union damaged their property, commercial general liability insurance will protect you. This form of insurance protects you against third-party accidents and injuries; it pays for the cost of any legal fees, as well as damages that may be awarded.
- Workers' Compensation - If you have employees in almost any state - you'll also need to invest in workers' comp insurance. This form of coverage will cover the cost of any medical expenses and lost wages should an employee sustain a work-related injury or illness.
These are just some examples of the type of credit union insurance policies a credit union should invest in. The amount of coverage needed will vary and are dependent on the specifics of each individual credit union.
Federal Credit Union's Risks & Exposures
Premises liability exposure comes from slips and falls due to public access to the premises. As customer safety and security are very important, the credit union may have one or more armed security guards on duty while it is open. All employees must be trained in proper procedures during a holdup to minimize the possibility of violence to or kidnap of customers. Floors, stairs, and elevators need to be in good condition, with steps and uneven floor surfaces prominently marked.
The number of exits must be sufficient and well-marked, with backup lighting in the event of a power failure. Steps should have handrails, be well-lighted, marked, and in good repair. Parking lots and sidewalks need to be in good repair with snow and ice removed, and generally level and free of exposure to slips and falls. There should be security in the parking lot equal to or better than the surrounding area. If the business is open after dark, such as for access to ATM machines or deposit boxes, lighting must be adequate.
Personal injury exposure arises from breaches of customers' privacy and confidentiality of their financial records, discrimination in lending practices, and for allegations of assault and battery during the apprehension of suspected robbers. The use of closed-circuit camera systems prevents such incidents from evolving into a "he said / she said" situation. Employees must be trained to handle such situations properly.
Product liability exposure is very low as financial products sold to customers are intangible. There may be some minor exposure if the credit union sells items like tee shirts or advertising novelties or offers small gifts to customers as a reward for doing business with them.
Directors and officers exposure may be limited if the credit union is small and run by members. If operations are larger and operate more like a bank, the exposure increases as directors and officers are more likely to be sued for results of their decisions in times of economic downturn. Credit unions may offer investment advisory services, estate handling, management of individual and corporate trusts, employee pension funds, escrow fund gathering and other financial activities. Directors and officers can be sued if funds from any of these are mismanaged.
Errors and omissions exposure by accountants and auditors can cause significant loss. There must be checks and balances in place to quickly catch and fix errors that are made. The background and training of all professional-level employees must be thorough and continual to keep up-to-date with industry changes. Monitoring is necessary.
Workers compensation exposures are moderate due to the possibility of injury or death of guards, tellers, and managers during an armed robbery. Tellers should be separated from customers by barriers such as high counters. Those working with customers at walk-up or drive-in windows should be protected by bulletproof glass enclosures. As most work is done on computers, employees are exposed to eyestrain, neck strain, and repetitive motion injuries including and carpal tunnel syndrome. All workstations should be ergonomically designed to reduce the chance of such injuries.
Property exposures are primarily from fire due to the electrical wiring for computers, printers and other electronic office equipment, heating, and air conditioning systems. All wiring must meet current codes, be well maintained, and be adequate for the credit union's operations. Circuitry for electronic equipment may be easily damaged from smoke, water, and heat, which will result in a total loss even with a small fire.
The building and its contents can be damaged during burglaries, robberies, and vandalism. Appropriate security measures should be taken, including physical barriers to prevent entrance to the premises after hours and an alarm system that reports directly to a central station or the police department. Since regulations require that customers have access to their monies on deposit at all times, disaster planning for potential interruptions is vital. Extra expense coverage should be considered as the credit union must continue operations after a loss.
Crime exposures are primarily from employee dishonesty, either from the theft of cash or from the improper transfer of funds held for customers. Money and securities can be stolen during armed robbery and safe burglary. Credit unions need a Financial Institutions Bond to cover these exposures. Background checks should be conducted for anyone who will have access to the accounts.
There must be regular monitoring and auditing of the books by outside auditors to prevent and identify problems. All employees must take at least one continuous week of vacation a year. Safes, vaults, theft-proof cashier cages, guards, and watchpersons are needed to protect money. Tellers' drawers should be stripped regularly and money moved to the vault. Bank drops should be made throughout the day to prevent a large buildup of cash available to thieves.
Controls and programming to prevent computer fraud should be reviewed. Extortion is a growing concern due to the high value of assets held by credit unions.
Inland marine exposure is from accounts receivable for billings to customers, computers for tracking financial data, and valuable papers and records for customers' and regulatory information. Off-premises coverage should be considered for kiosks and self-standing cash machines in other stores. Duplicates of all data should be made and maintained and stored at a separate location for ease of restoration in the event of a loss.
Business auto exposures may be limited to hired and non-owned exposure for employees running errands. If the company provides vehicles to officers or key employees, policies should be in place for personal and permitted use of the vehicles. Any driver must have a valid driver's license and acceptable MVR. Vehicles must be well maintained with records kept in a central location.
What Does Credit Union Insurance Cover & Pay For?
Credit unions, like any financial institution, can face various legal challenges that may result in lawsuits. Some of the common reasons credit unions may be sued include:
Breach of contract: Credit unions may face lawsuits if they fail to fulfill their contractual obligations with members or other parties. For example, if a credit union fails to provide a loan as agreed, or if it violates the terms and conditions of an account agreement, it may be sued for breach of contract.
How insurance can help: Credit unions can have professional liability insurance, also known as errors and omissions (E&O) insurance, which can help cover the costs of defending against breach of contract lawsuits. E&O insurance can provide coverage for legal fees, court costs, and damages incurred due to alleged errors, omissions, or negligence in providing financial services.
Employment practices liability: Credit unions may face lawsuits from employees or former employees alleging wrongful termination, discrimination, harassment, or other employment-related issues.
How insurance can help: Credit unions can have employment practices liability insurance (EPLI) which can provide coverage for legal defense costs, settlements, and damages associated with employment-related lawsuits. EPLI can help protect credit unions against financial losses arising from such lawsuits.
Fraud or embezzlement: Credit unions may face lawsuits if their employees engage in fraudulent activities or embezzlement, resulting in financial losses for the credit union or its members.
How insurance can help: Credit unions can have crime insurance or fidelity bond coverage, which can provide coverage for losses resulting from employee dishonesty, theft, or fraud. This type of insurance can help credit unions recover some or all of the financial losses incurred due to fraudulent activities, and may also cover legal fees associated with investigating and pursuing legal action against the employees involved.
Data breaches or cybersecurity incidents: Credit unions may face lawsuits if they fail to adequately protect the personal and financial information of their members and experience a data breach or cybersecurity incident.
How insurance can help: Credit unions can have cyber liability insurance, which can provide coverage for costs related to data breaches, such as legal fees, notification and credit monitoring services for affected members, public relations efforts, and regulatory fines. Cyber liability insurance can help credit unions manage the financial impact of data breaches and cybersecurity incidents.
Regulatory compliance issues: Credit unions are subject to numerous federal and state regulations, and failure to comply with these regulations can result in fines, penalties, and lawsuits from regulatory agencies.
How insurance can help: Credit unions can have regulatory liability insurance, also known as directors and officers (D&O) insurance, which can provide coverage for legal defense costs, settlements, and damages resulting from regulatory actions or lawsuits against the credit union's directors and officers. D&O insurance can help credit unions protect their management team and board members from personal financial losses associated with regulatory compliance issues.
It's important to note that insurance policies may have various terms, conditions, and exclusions, and the extent of coverage may vary depending on the specific policy and circumstances. Credit unions should work closely with their insurance providers to understand the scope and limitations of their insurance coverage and ensure they have appropriate insurance in place to protect against potential lawsuits.
Commercial Insurance And Business Industry Classification
- SIC CODE: 6019 Central Reserve Depository Institutions, Not Elsewhere Classified, 6061 Credit Unions, Federally Chartered, 6062: Credit Unions, Not Federally Chartered
- NAICS CODE: 522130 Credit Unions
- Suggested Workers Compensation Code(s): 8810 Clerical Office Employees NOC, 8742 Salespersons or Collectors - Outside
6019: Central Reserve Depository Institutions, Not Elsewhere Classified
Division H: Finance, Insurance, And Real Estate | Major Group 60: Depository Institutions | Industry Group 601: Central Reserve Depository Institutions
6019 Central Reserve Depository Institutions, Not Elsewhere Classified: Central reserve depository institutions, other than Federal Reserve banks, primarily engaged in providing credit to and holding deposits and reserves for their members, such as savings banks, savings and loan associations, or credit unions.
- Central liquidity facility
- Federal Home Loan Banks
- National Credit Union Administration (NCUA)
6061: Credit Unions, Federally Chartered
Division H: Finance, Insurance, And Real Estate | Major Group 60: Depository Institutions | Industry Group 606: Credit Unions
6061 Credit Unions, Federally Chartered: Cooperative thrift and loan associations (accepting deposits) organized under Federal charter to finance credit needs of their members.
- Federal credit unions
6062: Credit Unions, Not Federally Chartered
Division H: Finance, Insurance, And Real Estate | Major Group 60: Depository Institutions | Industry Group 606: Credit Unions
6062 Credit Unions, Not Federally Chartered: Cooperative thrift and loan associations (accepting deposits) organized under other than Federal charter to finance credit needs of their members
- State credit unions, not federally chartered
Credit Union Insurance - The Bottom Line
To learn more about what type of credit union insurance you should carry and how much coverage you should have, speak with a trusted insurance broker.
Additional Resources For Financial Institutions Insurance
Discover the types of commercial insurance that banks, finance companies and other financial institutions need to protect their asset management, deposit, lending, investment and other operations.
- Check Cashing
- Credit Union
- Currency Exchanges
- Finance Companies
- Insurance Company
- Mortgage Broker
- Specialty Financial Institutions And Services
- Specialty Insurance Services
Financial institutions, including banks and finance companies, are responsible for managing and handling large amounts of money on a daily basis. With this responsibility comes a certain level of risk and potential for financial loss due to unexpected events such as natural disasters, cyber attacks, or employee theft.
Business insurance can help protect these financial institutions from financial loss due to unexpected events. For example, a natural disaster such as a flood or earthquake could result in physical damage to a bank's property or equipment, leading to costly repairs and lost revenue. Insurance can cover these costs and help the bank get back up and running as quickly as possible.
In addition, financial institutions are also at risk for cyber attacks and data breaches. These types of incidents can lead to significant financial loss, as well as damage to the institution's reputation. Insurance can provide coverage for the costs associated with responding to a cyber attack, including legal fees, notification and credit monitoring services for affected customers, and public relations efforts to repair any damage to the institution's reputation.
Finally, financial institutions must also consider the risk of employee theft or fraud. Commercial insurance can provide coverage for losses due to employee dishonesty, helping to protect the institution's financial stability and reputation.
In summary, financial institutions have a lot at stake when it comes to protecting their assets and reputation. Commercial insurance can help mitigate the risk of financial loss due to unexpected events, ensuring that these institutions are able to continue serving their customers and fulfilling their financial responsibilities.
Minimum recommended small business insurance coverage: Business Personal Property, Extra Expense, Equipment Breakdown, Financial Institutions Bond, Accounts Receivable, Computers, Valuable Papers and Records, General Liability, Directors' and Officers' Liability, Employee Benefits, Fiduciary Liability, Professional, Umbrella, Hired and Non-Owned Auto, Workers Compensation & Surety Bonds.
Other commercial insurance policies to consider: Buildings, Earthquake, Flood, Leasehold Interest, Real Property Legal Liability, Computer Fraud, Extortion, Fine Arts, Signs, Cyber Liability, Employment-related Practices, Law Enforcement Professional, Business Auto Liability and Physical Damage And Stop Gap Liability.