This article is a sponsored feature by the Canada Deposit Insurance Corporation (CDIC) and has been reviewed and approved by Moneywehave.com.
Many individuals often inquire about what happens to their deposited funds in the event of a bank’s failure. The reassuring news is that your deposits are insured up to $100,000 under the Canada Deposit Insurance Corporation (CDIC). To provide a clearer understanding of deposit insurance, I’ve collaborated closely with CDIC, who has crafted this informative guest article on safeguarding your money.
We all strive to set aside funds for significant life goals—whether it’s purchasing a home, financing our children’s education, saving for retirement, or planning that dream vacation. We typically store these savings in banks and financial institutions throughout Canada. However, have you ever considered the implications if the institution holding your funds were to collapse? That’s where the Canada Deposit Insurance Corporation comes into play, a federal Crown corporation dedicated to protecting deposits in its member banks in the unfortunate event of a failure.
If you haven’t previously heard of CDIC or deposit insurance, you’re certainly not alone. Only about half of Canadian adults are aware of CDIC’s existence, and even fewer millennials are informed about it. Yet, deposit insurance plays a critical role in our nation’s financial framework, bolstering overall economic stability. Those familiar with how deposit insurance operates can rely on CDIC to ensure that their hard-earned savings remain secure when required.
Here are six essential points you should know regarding CDIC deposit insurance:
No Cost or Registration Required
CDIC offers protection for eligible deposits in its member institutions, ensuring coverage of up to $100,000 for each category. There is no necessity to register or pay premiums. Anyone who holds eligible deposits with a CDIC member bank benefits from this protection, provided these deposits are in Canadian funds. The depositor’s citizenship or residence does not influence coverage.
Banks Can and Have Failed
Throughout its 50-year history, CDIC has managed the closures of 43 of its member institutions! These failures impacted over 2 million Canadians, yet not a single dollar under CDIC protection was lost. The most recent instance of failure occurred in 1996. Although it has been decades since the last occurrence, the potential always exists, and CDIC prepares diligently for such scenarios.
CDIC Has a Wide Membership
More than 80 financial institutions, ranging from Canada’s largest banks to smaller trust companies, are part of CDIC. This ensures that deposits at each member are protected distinctly from one another. Wondering if your bank is a member? You can find the complete list here. You can also look for the CDIC membership emblem on your bank’s website. Note that some CDIC members operate under trademarked names that may not represent distinct entities but are still covered under their parent company (for example, EQ Bank under Equitable Bank). If your financial institution is not listed, don’t hesitate to reach out to them to check on their CDIC membership status.
Coverage Limitations Exist
While deposit insurance safeguards eligible deposits held in your name, as well as joint accounts, trust accounts, TFSAs, RRSPs, and more, there are exclusions. CDIC does not cover investment products such as stocks, bonds, and mutual funds. For a comprehensive understanding of what is included and excluded from coverage, refer to the official breakdown.
Understanding the Coverage Limit
The CDIC provides protection of up to $100,000 (inclusive of principal and interest) per deposit category within each member. There are seven categories. For instance, deposits owned solely by you are secured separately from joint accounts. Accounts such as RRSPs and TFSAs also receive distinct coverage. If you maintain a chequing account, a joint savings account with a spouse, another joint account with a parent, a TFSA, and an RRSP, you could potentially be protected for up to $500,000—all assuming these accounts are with the same member bank. If you also have a TFSA and a savings account at a different member bank, that adds another $200,000 of coverage! There are numerous combinations available to maximize your protection from CDIC. Discover more about how CDIC covers different types of accounts.
Assessing Your Coverage
If you hold various financial products across one or more member institutions and want to know how much of your money is secure, it’s straightforward. CDIC provides an online estimator that can assist you in calculating your coverage. Give it a try!
Further Information About CDIC
Now that you have gained insights into CDIC and deposit insurance, you’ll feel more empowered when making financial decisions for yourself and your loved ones. Follow CDIC on Twitter, Facebook, and LinkedIn for additional information, useful resources, and videos. Happy saving!