What is CDIC insurance?
In Canada, eligible deposits (like savings accounts, GICs, money orders, and more) can be covered by something called Canada Deposit Insurance Corporation (CDIC) Insurance if the financial institution holding the deposit is a CDIC member. CDIC protects eligible deposits, up to $100,000 per insured category, in case a member institution fails.
According to Canada Deposit Insurance Corporation: "Since its creation by Parliament in 1967, CDIC has handled 43 bank failures, affecting more than 2 million depositors. No one has lost a single dollar that is under CDIC protection."
What exactly is CDIC?
CDIC is a Crown corporation, which means it's established by the Canadian Government. It was created to provide deposit insurance to depositors of CDIC member institutions which include banks, federally regulated credit unions, loan and trust companies, and deposit taking associations governed by the Cooperative Credit Associations Act.
How does CDIC insurance work?
Under this coverage, if a CDIC member institution were to fail, the CDIC has tools to resolve them while protecting depositors and contributing to the stability of the financial system. The CDIC has a number of tools it can use to resolve member institutions, for example closing an institution and reimbursing insured deposits.
If a payout is the chosen resolution tool, depositors at that CDIC member institution would be reimbursed for insured deposits up to $100,000 per insured category.
Coverage is automatic, which means customers of the failed member institution don't need to go through effort or calculations in order to receive a CDIC payout in the event of failure. CDIC would contact the depositor, rather than the depositor having to make the contact.
How much of your money is covered?
You're covered for up to $100,000 of eligible deposits per insured category, and per member institution you deal with. In other words, it's possible to be covered for more than $100,000 of eligible deposits from the same member institution.
Each eligible joint deposit account is protected for up to $100,000, regardless of the number of people who own the deposit. This means that CDIC would provide coverage for an eligible deposit in a joint account for a total of up to $100,000 - no matter how many account holders there are.
Currently, eligible deposits include:
- Savings and chequing accounts
- Term deposits, such as GICs
- Money orders
- And more: see full list here
Insured categories include:
- Deposits held in your name
- Deposits held jointly
- Deposits inside an RRSP/RSP
- Deposits inside a TFSA
- Deposits inside a RRIF/RIF
- And more: see full list here
For example, if you had $100,000 in a savings account and $100,000 in RSP GICs, all $200,000 of these deposits would be eligible to be covered, because they're in different categories.
What's not covered?
CDIC insurance covers eligible deposits. It doesn't cover investments like mutual funds, stocks or bonds. So, in the above example, if the $100,000 in RSP GICs were held in mutual funds instead, the coverage wouldn't apply.
Although Canadian financial institutions have had very few failures compared to our neighbours in the south, it's nice to know that we have a mechanism in place for CDIC member institutions to protect our eligible deposits.