If an association's governing documents do not require FDIC insured investments, boards should still make sure the association's monies are insured.

Private Insurance. Some banks carry private insurance to cover deposits, including deposits that exceed FDIC limits. One program (www.bancinsure.com) will issue insurance policies in the association's name. If the bank fails, the deposit is covered by the insurance.

Surety Bonds. Other banks use surety bonds that insure the bank rather than individual accounts. While this reduces the association's risk, it is not risk-free. There are two problems with the bond: (i) the bank is the named insured, not the association, and (ii) the insurance is limited to a specific dollar amount--if the bank fails, the insurance will only pay to its policy limits regardless of the aggregate amount in depositor accounts. This means any gap in coverage falls to the depositors, who may be paid only pennies on the dollar.

Legal Review. If boards elect to use non-FDIC insured accounts, they should have the insurance reviewed by legal counsel to make sure there are no loopholes in the policy.