This is a sponsored post written by the Canada Deposit Insurance Corporation. This has been reviewed and approved by Moneywehave.com
Editor’s note: One of the most common questions I get is what happens to your deposited money if a bank fails? Well the good news is that you’re covered up to $100,000 thanks to the Canada Deposit Insurance Corporation (CDIC). To explain what deposit insurance is, I partnered directly with CDIC who provided this guest post on how your money is protected.
We all work hard to save money for our future – to buy a home, to pay for our children’s education, for retirement or for a dream trip. And we keep these savings in banks and other financial institutions across Canada. But have you ever stopped to wonder what would happen to your money if the financial institution holding it were to fail? Enter the Canada Deposit Insurance Corporation, a federal Crown corporation that protects deposits in all its member banks in the event of a failure.
If you’ve never heard of CDIC or deposit insurance, you’re not alone. Less than half of all adults in Canada are aware of CDIC, and even fewer millennials (around 30%) are aware. But deposit insurance is an integral part of our country’s economic system and it contributes to our overall financial stability. Those who know how deposit insurance works can trust CDIC to make sure their hard-earned savings are there when they need them.
Here are 6 things you need to know about CDIC deposit insurance:
It’s free and you don’t need to sign up
CDIC protects eligible deposits in its member institutions, up to a maximum of $100,000 per coverage category. You do not need to sign up or pay any premiums. Anyone with eligible deposits in one of CDIC’s member banks is protected, as long as these deposits are in Canadian funds. Citizenship or country of residence of the depositor doesn’t impact coverage.
Banks can fail and they have
In CDIC’s 50-year history, they’ve handled the failures of 43 of their members! These failures affected over 2 million Canadians, but not a single dollar under CDIC protection was lost. The most recent failure was a little over 20 years ago, in 1996. While it hasn’t happened in decades, it can happen and CDIC works hard to be ready for this possibility.
CDIC has over 80 members
From Canada’s biggest banks, to small trust companies across the country, over 80 financial institutions are members of CDIC. This means that savings in each of these members are protected separately from the other members. Curious if your bank is a member? You can see the full list here. Alternatively, you can look for CDIC’s membership sign on your bank’s web site. Note: some CDIC members have trademark companies which are not distinct members, but which may fall under the coverage of their parent company (Such as EQ Bank falling under Equitable Bank). If your financial institution isn’t on this list, you can contact them and inquire about their CDIC membership.
Not everything is covered
While deposit insurance protects eligible deposits in your own name, joint accounts, trust accounts, TFSAs, RRSPs, RRIFs and more; not everything is covered. CDIC does not protect foreign currency accounts, term deposits with a term greater than 5 years, or investment products like stocks, bonds and mutual funds. Here is a full breakdown of what is and isn’t covered.
The “limit” really isn’t the limit
CDIC protects up to $100,000 (including principal and interest) per deposit category in each member. There are 7 categories. For example, deposits in your own name are protected separately from joint accounts. Deposits in RRSPs, TFSAs and more also each receive their own coverage. If you have a chequing account, a joint savings account with a spouse, a joint account with a parent, a TFSA and an RRSP, you could have protection of up to $500,000 – and this assumes all these accounts are with the same member. If you also have a TFSA and a savings account in another member bank, that’s another $200,000 of protection! So there are endless ways to ensure your money is protected by CDIC.
You can calculate your coverage
So you have several financial products in one or more member banks. Now you want to know how much of your money is safe? No problem. CDIC has an online estimator to help you calculate your coverage. Try it out!
Test your knowledge
Now that you’ve learned a little about CDIC and deposit insurance, you’ll be better informed when making financial decisions for yourself and your family. CDIC has created a fun, 5-minute trivia game so you can test your knowledge and learn even more. You can also follow them on Twitter for more coverage info, helpful tools and videos. Happy saving!