Siddhi Bagwe
Hannah Logan
Beth Buczynski
Have you ever wondered what happens to your money if the bank where you’ve deposited it goes out of business? Thanks to the deposit insurance provided by the Canada Deposit Insurance Corporation, more commonly referred to as the CDIC — you can rest easy knowing that your funds are safe.
What is the CDIC?
The CDIC launched in 1967. It’s not a bank or a private insurance company. Canada Deposit Insurance Corporation is a non-profit Crown corporation set up to protect Canadians’ money. About 85 CDIC member institutions fund the organization to ensure Canadians’ deposits in the case of a banking collapse.
If you see the CDIC logo on a financial website or on your finance and banking documents, it means that your financial institution is a CDIC member.
What does the CDIC cover?
Since most people have more than one type of bank account, the CDIC insures eligible deposits separately.
How much money is insured in a bank account in Canada?
| Account type | CDIC coverage limit |
|---|---|
| Individual account | GICs, term deposits, savings and chequing accounts held in a single name are eligible for combined coverage of up to $100,000, per CDIC member bank. |
| Joint account | Joint deposits held in the names of two or more people are covered for up to $100,000 per group of joint owners, per CDIC member financial institution. |
| Registered Retirement Savings Plan (RRSP) | GIC, term deposit and savings account deposits held in an RRSP are eligible for an aggregate maximum CDIC coverage of $100,000. |
| Registered Retirement Income Fund (RRIF) | GIC, term deposit and savings account deposits held in an RRIF are eligible for an aggregate maximum CDIC coverage of $100,000. |
| Registered Education Savings Plan (RESP) | GIC, term deposit and savings account deposits held in an RESP are eligible for an aggregate maximum CDIC coverage of $100,000. |
| Registered Disability Savings Plan (RDSP) | GIC, term deposit and savings account deposits held in an RDSP are eligible for an aggregate maximum CDIC coverage of $100,000. |
| Tax-Free Savings Account (TFSA) | GIC, term deposit and savings account deposits held in a TFSA are eligible for an aggregate maximum CDIC coverage of $100,000. |
| First Home Savings Account (FHSA) | GIC, term deposit and savings account deposits held in an FHSA are eligible for an aggregate maximum CDIC coverage of $100,000. |
| Trust | All deposits held by a trustee per beneficiary are insured for the limit of $100,000. |
The CDIC covers up to $100,000 in principal and interest per account, including foreign currencies like USD.
However, let’s say your money is held in an account protected by multiple financial institutions. Then your funds in the account will receive extended coverage, provided all the banks are CDIC members. For example, Wealthsimple Cash accounts are insured with up to three CDIC member institutions, extending a collective coverage of up to $300,000.You can learn more about a specific type of coverage on the official CDIC website.
What the CDIC does not cover
It’s important to note that the CDIC doesn’t cover everything. For instance, the CDIC does not cover any losses due to fraud or theft. Additionally, CDIC coverage does not include deposits held in:
- Mutual funds.
- Exchange Traded Funds (ETFs).
- Cryptocurrencies.
- Stocks.
- Bonds.
The Canadian Investor Protection Fund (CIPF) may protect your funds held in the other investment accounts. Make sure you check the financial institution’s website or product document.
How does CDIC insurance work?
Canada Deposit Insurance Corporation protects $1 trillion in deposits and aims to maintain a stable Canadian financial system. It makes sure that Canadians feel safe depositing their money with the financial institutions that are CDIC members. In the unlikely event that a member bank was to close, CDIC will take measures to support the sale of the affected bank and reimburse the depositors.
CDIC insurance is not a service you pay for; it is free. If you use a CDIC-member financial institution and an account that the CDIC covers, your funds, up to $100,000, are automatically insured. However, you still need to read the fine print and understand how coverage works.
Here are some examples of how CDIC coverage would work:
- Suppose you have savings and chequing accounts at the same bank with a combined balance of $150,000. If that bank fails, you are only insured for $100,000 because both accounts fall under the CDIC’s “deposits held in one name” standard.
- If you have a savings account and a TFSA at the same bank, then you are covered for up to $100,000 in each account since they fall under separate categories.
- Let’s say you have a chequing account at one bank and a savings account at another and both banks fail, then you can claim both because they are with separate financial institutions.
What happens if a bank fails?
Should a bank or financial institution fail, CDIC serves as a resolution authority for all members. Their objectives in resolution are as follows:
- Protect eligible deposits.
- Maintain the flow of critical financial services.
- Protect the Canadian economy.
- Minimize risk to taxpayers.
These resolutions may include closing an institution and reimbursing insured deposits. Other strategies may involve sale of shares or assets, amalgamation with another financial institution, recapitalization, restructuring, or private solutions.
While the idea of a bank failure is quite stressful, you can take some solace in knowing that since the CDIC’s inception in 1967, there have been 43 failures affecting more than 2 million account holders. However, the CDIC ensured that nobody lost their hard-earned money in those events.
Know the CDIC members
CDIC member institutions include domestic banks and subsidiaries, associations, trust and lending companies, divisions of foreign financial institutions and federally regulated credit unions. These comprise of Canada’s Big Six banks such as the Bank of Montreal, RBC, and CIBC as well as online banks like EQ Bank and Tangerine Bank.
You can find the complete list of CDIC members here. Alternatively, you can keep an eye out for the CDIC badge. Members will display this badge on their website, app, and at their physical branch locations.
What if your bank is not a CDIC member?
If you cannot find your financial institution on the CDIC member list, contact the CDIC to check for deposit protection. However, if you bank with a provincial credit union, caisse populaire or trust, know that your accounts will likely be covered by the province’s deposit insurer. You can inquire about your insurance coverage with your financial institution or the respective provincial insurer.
For instance, financial institutions in Alberta will be protected by the Credit Union Deposit Guarantee Corporation; in British Columbia, the Credit Union Deposit Insurance Corporation of British Columbia and in Ontario, the Financial Services Regulatory Authority of Ontario.
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