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Ever wonder how safe your money is in the bank? Find out how CDIC, also known as the Canada Deposit Insurance Corporation, insures your money for you.
Toilet paper isn’t the only thing Canadians were hoarding early in the pandemic. Headlines were buzzing that the Bank of Canada was running short of $50 bills too. Whether you were stuffing cash in your mattress or in the bottom of your sock drawer, the truth is your savings are safer at a financial institution because it’s likely insured by the fiscal guardian angel called the Canada Deposit Insurance Corporation (CDIC).
The upside is that your coverage comes for free—but before we get into that good news, let’s dive into the CDIC’s history and break down why your bank is the safest place to keep your savings.
A non-profit crown corporation launched in 1967, the CDIC is clear on their website about how they don’t define themselves: “We are not a bank. We are not a private insurance company.”
Funded by premiums paid by their member financial institutions (which is why you benefit from this security blanket for free), the CDIC insures your deposits in the event of a bank’s collapse. Thanks to their oversight, no Canadian has lost even a single dollar due to the closure of a bank since their inception.
Motivated to keep the stability of the financial system in Canada in check by protecting Canadians and their valuable savings, the CDIC insures over $800 billion in deposits at over 80 member institutions.
Keeping up with the COVID-era concern to hold on to hard-won dollars, the CDIC’s most recent initiatives include expanding coverage to include eligible deposits at member institutions in all foreign currencies, and GICs with terms greater than five years. (Compare the best GIC rates in Canada.)
In the event your financial institution goes bankrupt, at least $100,000 of the money you hold in deposits such as chequing, savings and GIC accounts is covered by the CDIC.
You could be entitled to even more coverage, depending on how you deposit your money over various accounts and institutions. But before delving into that strategy, let’s review the basics.
To qualify for any coverage, your financial institution needs to be a CDIC member. There are 86 member banks total including the Big Five banks—BMO, CIBC, RBC, Scotiabank and TD—along with online-only financial services like EQ Bank and Alterna Bank. To find out which financial institutions are covered, you can scroll through the complete list; in addition, members always display the CDIC badge at their branches, and on their websites and apps.
Like any insurance coverage, the CDIC has its maximum payout limits. In the event your member financial provider closes, they will insure up to $100,000 in deposits in each of the following seven categories:
These CDIC categories dictate their inner workings and how they deliver their benefits in the event that you need them.
For every one category that you have savings in, you will receive $100,000 of coverage. Sounds simple enough, right? Keep reading to get the full details that allow you to protect more of your money.
When it comes to insurance coverage, your deposits are divided up according to the seven categories defined by the CDIC, and not the accounts you are holding them in.
For example, if you have $100,000 in a savings account and $100,000 in a chequing account, you will receive a total of $100,000 worth of coverage because they are in the same category called “deposits held in one name.”
However, if you have $100,000 in a savings account and a $100,000 deposit held in a TFSA savings account, you will receive a total of $200,000 worth of coverage because your money is stashed in two different CDIC categories—“deposits held in one name” and “deposits held in a TFSA” respectively ($100,000 worth of coverage per category). If you also have a $100,000 deposit held in an RRSP, you will receive a total of $300,000 of coverage because you have savings in three different categories ($100,000 worth of coverage per category).
The $100,000 maximum coverage per category is also per bank, because each member organization pays premiums to make this insurance available to you. To put this in dollars and sense, when you have $100,000 in a savings account at one bank, and $100,00 in a savings account at another bank, you will receive $200,000 worth of coverage ($100,000 worth of coverage per bank).
If you’re holding $100,000 or less in deposits at one financial provider, you don’t have to worry about maximizing your CDIC insurance because, at the minimum, you’ll receive $100,000 in coverage per bank across all your deposit accounts..
Once you have more money to stash, consider spreading it around so you can keep all your cash protected. With 86 CDIC member institutions, you have plenty of room to insure your savings by opening multiple accounts, each worth $100,000, at different banks.
For instance, when you have $700,000 to tuck away, you might consider opening seven accounts worth $100,000 each at seven different banks.
If you prefer to stick to one tried-and-true bank, you can open up a $100,000 account in each of the seven categories to protect up to $700,000. For instance, $100,000 in a non-registered savings account, and $100,000 in a registered RRSP savings account.
Compare the Best GIC Rates in Canada
Turns out, not all investments are covered. When you invest in stocks, bonds, ETFs, mutual funds and cryptocurrencies, you take on all the risk. However, the Canadian Investor Protection Fund (CIPF) may cover cash balances you hold, for example, in your brokerage account, if it is a CIPF-member institution. Like the CDIC, the CIPF is a non-profit crown organization with its members paying premiums so you are provided with some coverage in case a firm you are investing through goes bankrupt. However, if your investment, like a stock, hits bottom, no one is covering you for that.
You may still have deposit protection offered at a provincial level. The Deposit Insurance Corporation of Ontario (DICO) is a public agency governed by the province, while all the remaining provinces rely on private corporations to insure your savings. For complete details on how to protect your assets, ask your financial advisor to clarify who’s insuring your bottom line, and how much of it will be covered.
That depends on how your credit union is regulated. Your savings and deposits through provincially regulated credit unions are covered by the crown regulatory agency run by the appropriate provinces. Federally regulated credit unions are covered by CDIC, if they are registered members. Check the CDIC site members section to see if it is covered. If not, click below by province.
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These CDIC writeups on the web never seem to answer one specific question I have. We always read about “eligible deposits at financial institutions” and that GICs are also covered. So I wonder what you will say about the following scenario?
Suppose I hold GICs in an account at a discount broker. The broker is presumably not CDIC insured since it deals mainly with trading stocks and ETFs. However, suppose one of my holdings in the brokerage account is a $100k CIBC GIC. Another is a $100k BMO GIC, another a $100k TD GIC, etc.
(Q1) Am I covered up to $100k if, say, CIBC becomes insolvent? Or is the answer no, because the deposit is at an entirely different financial institution (specifically, the deposit is in the brokerage, which is not CIBC)?
(Q2) Am I covered up to $200k if, say, both CIBC and BMO become insolvent simultaneously?
In other words, the heart of the question is: Does the *account* where GICs are held affect CDIC, or does only the *issuer of the GIC* matter? You’d think this information would be ultra-clear on the CDIC website, or on the hundreds of online writeups. Alas, it is not. At least not to me. The CDIC’s online calculator cannot make the distinction between the issuer of a GIC and the institution at which it is held. (Seems crazy to me. Who walks into a bank to buy a GIC when your online discount broker can do it at the press of a button?)
Thanks,
Paul
Due to the large volume of comments we receive, we regret that we are unable to respond directly to each one. We invite you to email your question to [email protected], where it will be considered for a future response by one of our expert columnists. For personal advice, we suggest consulting with your financial institution or a qualified advisor.
Very confusng writing up.
Here is my understanding:
banking categories: saving, chequing, tfsa, rrsp, gic
CDC covers up to 100k per category per bank. ( this is key point)
I am planning to buy some gics and therefore I need to buy them at different banks in order to get the coverage.
If my understanding is correct, then the writer should have pointed up quite simply
and would have saved a lot of verbage and confusion.
Hi Paul, I called cdic directly about your question, as I wondered if 3rd party GICs with other banks are insured if they are invested through CIBC Investors Edge. I was told that the insurance is with the GIC bank and not the broker.
What percent of the 800 billion does CDIC have in assets to cover depositors. Also in the event of a failure what kind of timeframe can one expect to have access to their deposits?
I hold $60,000 plus in a Cdn. Margin account with one of the “big five” Cdn. banks. I also hold $100,000 of a GIC in that same account but it is issued by another one of the big five, not by the bank in which it is held. What is covered?
Due to the large volume of comments we receive, we regret that we are unable to respond directly to each one. We invite you to email your question to [email protected], where it will be considered for a future response by one of our expert columnists. For personal advice, we suggest consulting with your financial institution or a qualified advisor.