Putting all your CD eggs in one basket

We like the rates they offer on CDs, as well as their bump feature, which allows us to bump our rate should rates rise. My question is, are we crazy to keep all our eggs in one basket? Is our money truly safe with the Excess Share Insurance, or would you spread it around and not exceed the typical $100,000 federally insured balance?
-- C.U. Kelly

Dear Kelly,
Excess Share Insurance is supplemental share insurance purchased by a credit union for its members. The insurer is Excess Share Insurance, or ESI, a licensed property and casualty insurance company established in 1992 and domiciled in Ohio. ESI is a subsidiary of American Share Insurance, or ASI, the nation's largest provider of private deposit insurance. Currently this coverage is offered in 32 states and the District of Columbia.

Coverage is up to $250,000 over the National Credit Union Share Insurance Fund, or NCUSIF, on insured share accounts. For traditional accounts that means total insured deposits of up to $350,000, and in certain retirement accounts that combined total is up to $500,000.

While it's the credit union that is the policyholder, it is required to notify the shareholder if it stops participating in the insurance program or if the amount of coverage changes. It's up to the credit union to decide if it will charge the shareholder a premium for this insurance.

Certainly, having the supplemental insurance coverage is better than not having the coverage. The risk you're facing is minimal. That said, ESI doesn't carry the same weight as the full faith and credit pledge of the United States government for NCUSIF-insured shares.

If this $250,000 represents all of your life savings then I wouldn't recommend that you have it all in this one credit union. You may not be comfortable investing in stocks and bonds, but it's likely that you need a better hedge against inflation than the yield you can earn on a CD with your credit union.

Treasury inflation-protected securities, or TIPS, and Series I savings bonds are two investments that have full faith and credit pledges -- although TIPS can and will fluctuate in value between purchase and maturity. TIPS aren't often recommended for taxable (nonretirement) accounts because of how income taxes are calculated on the inflation return component.

I think it's worth your while to consult with a fee-only financial planner about your financial goals and investments. The Bankrate feature, "Financial planners: not just for millionaires anymore," will help you shop for a planner.