What is Canada Deposit Insurance? 8 Things Every Canadian Needs to Know

Have you ever heard of the Canada Deposit Insurance Corporation (CDIC)?  If not, then don’t feel bad…you are in the company of 56% of Canadian women and over 70% of Canadian millennials. That being said, you really should know what it is and why it is important.

1-WHAT IS THE CDIC?

CDIC protects the money that you have deposited in eligible accounts at member financial institutions to a maximum of $100,000, per separately insured category, in case of a failure. It is obviously rare for banks and other financial institutions in Canada to fail, but it has happened and could happen again. In fact, CDIC has handled over 40 member failures since 1967.

2-HOW DO I GET DEPOSIT INSURANCE AND WHAT DOES IT COST?

Deposit insurance is not something that you actually have to ‘get’ or ‘buy’. In other words IT IS FREE and automatic. It is a protection offered by CDIC, a federal Crown corporation (aka- part of the government), and is automatically there for eligible deposits in member financial institutions.

3-IS MY BANK A MEMBER FINANCIAL INSTITUTION?

Over 80 Canadian financial institutions (banks, loan and trust companies, etc.) are CDIC members, so your bank likely is a member. The best way to find out is to click here to consult the directory on the CDIC website.

4-HOW DO I KNOW IF THE MONEY THAT I HAVE IN MY BANK ACCOUNT AND INVESTMENTS IS PROTECTED?

Whether or not a deposit is protected depends on a few things, including what institution is holding the deposit as well as the type of deposit, and the type of account or investment vehicle where the deposit is held. Watching the video above will give you a good overview of how it works. Consult the CDIC website for more complete information.

5-I DON’T HAVE A LOT OF SAVINGS OR INVESTMENTS, WHY IS IT IMPORTANT FOR ME TO KNOW ABOUT ALL OF THIS?

No matter how much, or how little, savings you have, you would not want to lose your hard-earned money in the event of a bank failure. Given that it costs you nothing, it is worth making sure that you understand how CDIC protects deposits- no matter how much or how little you actually have.

6-I AM THE PERSON RESPONSIBLE FOR MY AGING PARENTS’ FINANCES – DO I NEED TO BE AWARE OF ANYTHING SPECIFIC FOR THEM?

It is understandable that aging parents who are no longer working have their entire life’s savings in investments or bank accounts. It is important to understand the limits of coverage if you want to maximize their protection. Keep in mind that coverage is for deposits in eligible accounts at member financial institutions to a maximum of $100,000, per separately insured category, so depending on how much money you are dealing with, simply putting their savings into separate deposit categories may do the trick.

As an example, an account held by one person (e.g. your mom) is considered one category, while joint accounts are another category. Each set of joint account owners receives $100,000 of coverage, so an account held jointly by both of your parents would be separately covered from mom’s account. A third account held jointly by your Mom and yourself would be yet another potential $100,000 of protection. Putting $100,000 in each of those accounts is one of the ways that you might choose to ensure CDIC protection of $300,000 which may, as an example, be the proceeds of the recent sale of your parents’ home.

For more information on the categories, you can click here to learn more on the CDIC website.

7-I HEARD THAT THE CDIC ONLY COVERS UP TO $100,000, IS THAT TRUE?

No, that is not true.

CDIC coverage has changed over the years and so this may be why you have this impression. Today, as mentioned above, coverage is for deposits in eligible accounts at member financial institutions to a maximum of $100,000, per separately insured category. What this means is that the CDIC can cover WAY MORE than $100,000, if you place your deposits in different categories of accounts/investments and/or with different member institutions. If you do this properly, you can actually get coverage for an extremely significant amount of savings. Once again, I recommend consulting the CDIC website to get a better understanding of how this works.

8-WHAT’S THE CATCH?  WHY DOESN’T EVERYONE KNOW ABOUT THIS?

There’s no catch. As is often the case, it’s simply a matter of lack of awareness. That’s why when I was asked if I would be willing to work together with the CDIC to bring this information to my readers during Financial Literacy Month, I was eager to do so.

Disclosure: I have been compensated by the CDIC to help generate awareness about CDIC coverage available to Canadians. As with all sponsored posts, I will only ever share with you products and/or services I believe in. All opinions contained within are my own and cannot be bought