How Does CDIC Deposit Insurance Protect Your Money?
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 your finance and banking documents, it means that your financial institution is a CDIC member.
What does the CDIC cover?
Deposits eligible for CDIC coverage include:
Account balances in Canadian dollars or foreign currency in both registered and non-registered accounts.
Other types of deposits.
The CDIC covers these eligible deposits (including principal and interest) in multiple categories, outlined in the table below. That means if you have deposits in more than one category, your total coverage could add up to more than $100,000.
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 covered up to $100,000 in combined balances, per CDIC member bank. |
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. | |
GICs, term deposits and cash deposits held in an RRSP are eligible for a combined maximum CDIC coverage of $100,000. | |
GICs, term deposits and cash deposits held in an RRIF are eligible for a combined maximum CDIC coverage of $100,000. | |
GICs, term deposits and cash deposits held in an RESP are eligible for a combined maximum CDIC coverage of $100,000. | |
GICs, term deposits and cash deposits held in an RDSP are eligible for an aggregate maximum CDIC coverage of $100,000. | |
GICs, term deposits and cash deposits held in a TFSA are eligible for an aggregate maximum CDIC coverage of $100,000. | |
GICs, term deposits and cash deposits held in an FHSA are eligible for an aggregate maximum CDIC coverage of $100,000. | |
All deposits placed by a trustee for the same beneficiary are insured up to the limit of $100,000. |
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 held in trust at multiple CDIC member institutions, creating a collective coverage of up to $1,000,000. 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:
Mutual funds.
Exchange Traded Funds (ETFs).
Cryptocurrencies.
Stocks.
Bonds.
The Canadian Investor Protection Fund (CIPF) may protect your funds held in investment accounts if the financial institution goes out of business. Make sure you check the financial institution’s website or product document. Note that this coverage doesn’t protect you against losing money if an investment’s value decreases.
How does CDIC insurance work?
Canada Deposit Insurance Corporation protects more than $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 goes out of business, CDIC takes measures to support the sale of the affected bank and reimburse the depositors. It notes that the last bank failure was in 1996.
CDIC insurance is not a service you pay for; it is free. If you bank with a CDIC-member financial institution and keep your money in an account that the CDIC covers, up to $100,000 in each category is 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 individual 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.
However, let’s say the savings account is in your name, with a balance of $100,000. The chequing account is a joint account with your partner and has a balance of $50,000. Because the accounts fall into separate categories, all of your money is covered.
Say you have a savings account and a TFSA at the same bank. You are covered for up to $100,000 in each account since they fall under separate categories — although the TFSA coverage only applies to GICs and cash deposits, not stocks, bonds or other investments.
Let’s say you have a chequing account at one bank and a savings account at another. If both banks fail, you can claim up to $100,000 coverage for each account because they are with separate financial institutions.
What happens if a bank fails?
Should a bank or financial institution fail, CDIC collaborates with the government’s Department of Finance, the Bank of Canada, and other key partners. Their objectives in resolution are to:
Protect eligible deposits.
Maintain the flow of critical financial services.
Protect the Canadian economy.
Minimize risk to taxpayers.
These objectives may require the CDIC to help close an institution and reimburse insured deposits. Other strategies may involve sales 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, it has resolved 43 failures affecting more than 2 million account holders. However, the CDIC ensured that no one lost any money due to these failures.
Know the CDIC members
CDIC member institutions include domestic banks and subsidiaries, associations, trust and lending companies and divisions of foreign financial institutions. These members include:
Canada’s Big Six banks, such as the Bank of Montreal and CIBC.
Federally regulated credit unions like the Innovation Federal Credit Union.
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 are 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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Siddhi Bagwe
Siddhi Bagwe