You’ve worked hard for your savings, and the last thing you want is for your money to disappear in the rare event of a bank failure.
That’s why the Canada Deposit Insurance Corporation, or CDIC, exists. The CDIC is a guardian of financial security for Canadian depositors, protecting your savings if your financial institution fails.
No matter if you’re an avid saver, an investor, or simply someone who keeps their hard-earned funds in a bank or federal credit union, understanding the role of the CDIC and insurance limits is important to safeguarding your deposits.
Let’s take a closer look at the CDIC’s pivotal role in the Canadian banking landscape and the intricacies of the CDIC coverage limit.
What is the CDIC?
First things first, what is the Canada Deposit Insurance Corporation? Simply put, the CDIC is a federal Crown corporation that currently protects more than $1 trillion in Canadian deposits. In the rare event a CDIC member institution were to fail, they protect any eligible deposits.
Luckily, bank failures in Canada are uncommon. The Crown corporation has dealt with only 43 such incidents since it was established in 1967. That’s compared to the more than 500 bank failures in the United States since 2000.
Though Canadian banks are among some of the safest in the world, the CDIC provides priceless peace of mind.
The CDIC Insurance Limit: Explained
Like with most insurance, the CDIC has strict limits when it comes to coverage and categories.
Most important to note is that the CDIC maximum coverage is $100,000 per category. The CDIC limit includes principal and interest at each member financial institution.
The Government of Canada explains that this type of insurance covers common deposits, such as:
- Savings accounts and chequing accounts
- Guaranteed Investment Certificates (GICs) and other term deposits
- Foreign currency (for example, US dollars)
For a more granular understanding of CDIC coverage, you can see if your deposit falls under one of the nine categories the corporation currently covers:
- Deposits held in one name
- Deposits held in more than one name
- Deposits held in a registered retirement savings plan (RRSP)
- Deposits held in a registered retirement income fund (RRIF)
- Deposits held in a tax-free savings account (TFSA)
- Deposits held in a first home savings account (FHSA)
- Deposits held in a Registered Education Savings Plan (RESP)
- Deposits held in a Registered Disability Savings Plan (RDSP)
- Deposits held in trust
Remember, the CDIC’s coverage limit applies separately to each deposit category at each member institution. That means if you have more than $100,000, you can keep your savings safe by diversifying your money in different categories.
CDIC Coverage Limits
Though the Canada Deposit Insurance Corporation offers comprehensive coverage for a variety of deposits, it doesn’t cover all deposits.
The Government of Canada explains that deposit insurance does not cover:
- Mutual funds
- Stocks
- Bonds
- Exchange Traded Funds (ETFs)
- Cryptocurrencies
- Losses due to fraud or theft
Changes to the CDIC in 2023
While the CDIC insurance limit has remained consistent, there have been changes to deposit insurance coverage as federal budgets and the needs of the population change. In April 2023, CDIC coverage was expanded to include separate coverage for up to $100,000 for eligible deposits held in First Home Savings Account (FHSA).
This expansion of CDIC coverage limits was in response to the 2022 federal budget, where the Government of Canada announced the FHSA. This new category to the CDIC insurance coverage framework brought the total of nine separately insured deposit categories at each member institution.
It is completely possible that in the future the CDIC coverage limit will expand to include other categories as well.
Enhancing CDIC Coverage
As we said before, any eligible deposits in your savings accounts (or others), are protected separately from those in other categories such as RRSPs, RRIFs, etc. That means there are ways to maximize your coverage even with these CDIC limits in mind.
You can diversify your deposits by utilizing different account types. By spreading your deposits out across different accounts covered by the CDIC you can protect your savings and maximize the CDIC insurance limit.
Understanding the CDIC coverage limit is an important part of protecting your assets. It provides peace of mind that if your financial institution ever fails, the CDIC will automatically pay you without the need to file a claim.