CDIC Coverage is expanding | Separate RESP & RDSP coverage coming

The Canada Deposit Insurance Corporation (CDIC) is set to change how your eligible deposits are protected come April 30, 2022. But, don’t worry, none of these changes are for the negative. In fact, they address two major concerns that Canadians have had for a few years now. Deposits held in Registered Education Savings Plan (RESP) and Registered Disability Savings Plan (RDSP) will now each be separately covered categories.

What is CDIC?

Before we get to the changes, it’s worth going over what CDIC is. The CDIC provides insurance for eligible deposits if a bank fails. Currently, you’re covered up to $100,000 in seven different coverage categories. That number will increase to eight when the new changes are implemented on April 30, 2022.

 To be eligible for CDIC insurance, your money must be deposited at a member financial institution. You can quickly search online to see if your bank is a CDIC member. Alternatively, you can look for the purple logo in-branch, at ATMs, through the app, or via online banking.

While bank failures are rare, they do happen. The last time a bank failed in Canada was in 1996. If your bank fails, there’s no need to panic or file a claim. CDIC will automatically reimburse you for any eligible deposits. You won’t have to wait long as CDIC aims to return your funds within three business days.

There’s no need to sign up for CDIC insurance, and it doesn’t cost you anything. Member institutions pay premiums to CDIC. Plus, your citizenship and country of residence have no impact on your CDIC coverage.

CDIC changes coming on April 30, 2022

From time to time, CDIC will implement some changes to address the growing concerns of consumers. The following changes will take place on April 30, 2022:

• Up to $100,000 in separate coverage for eligible deposits held under Registered Education Savings Plans
• Up to $100,000 in separate coverage for eligible deposits held under Registered Disability Savings Plans
• Removal of separate coverage for deposits in mortgage tax accounts
• Improving the rules for trust deposit accounts by clarifying record keeping requirements to facilitate more timely payouts

The first two changes are long overdue. RESP and RDSP accounts will now be treated as separate categories under CDIC. That means you’ll get up to $100,000 in protection for each account.

While removing separate coverage for deposits in mortgage tax accounts may sound like you’re losing coverage, you’re actually still protected. CDIC is just combining these funds with other eligible categories such as individual or joint accounts. Don’t worry, there’s no need to move the funds out of your mortgage tax accounts as you’d still be protected.

As for the rules surrounding trust deposit accounts, they improve CDIC’s ability to reimburse you quickly if there’s a CDIC member failure.

What does CDIC cover?

Once the new changes kick in, CDIC will cover you for the following:

• Deposits held in one name
• Deposits held in more than one name (joint accounts)
• 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 Registered Education Savings Plan
• Deposits held in a Registered Disability Savings Plan
• Deposits held in a trust

Since each account gives you up to $100,000 in CDIC coverage, you could have up to $800,000 in coverage – or more if you have multiple beneficiaries. Keep in mind that this applies to each member institution. If you need more coverage, you could open up an account at another CDIC member institution. You can use the CDIC coverage calculator to quickly see what you’re eligible for.

It’s important to note that CDIC mainly covers deposits. That would include money in your savings and chequing accounts. It would also protect foreign currency accounts that you may have. Guaranteed Investment Certificates (GICs) and other term deposits are also covered.

What does CDIC not cover?

CDIC does not cover the following:

• Stocks
• Bonds
• Mutual funds
• Exchange-traded funds (ETFs)
• Cryptocurrency
• Non-fungible tokens (NFTs)

Some people may get confused about CDIC coverage since they cover certain accounts but not all types of deposits. For example, even though your RRSP is covered under CDIC, any mutual funds or ETFs would not be covered. You obviously wouldn’t be covered if your investments went down in value. CDIC only covers deposits.

Is CDIC safe?

Parliament established the Canada Deposit Insurance Corporation in 1967 to provide you with insurance against the loss of your eligible deposits. So there should be no concerns about how safe CDIC is.

CDIC is a federal Crown corporation that helps stabilize the Canadian financial system. The deposit insurance offered will protect consumers if a member institution fails. Since members include banks, federally regulated credit unions, loan and trust companies, consumers should feel very safe about their deposits.