Although 20 years have passed since a Canadian bank failed, it can happen.

That’s why Canada Deposit Insurance Corporation (CDIC) was established in 1967 — to protect ordinary depositors in such rare events. Since that time, 43 banks have failed, affecting more than 2-million depositors, but no one has lost a single dollar of the deposits under CDIC protection.

What’s covered

Some 80 financial institutions across Canada are members of the CDIC. They include banks, federally-regulated credit unions and loan and trust companies. For a full list of members, go to cdic.ca.
CDIC automatically covers eligible deposits in each of seven deposit categories, including Registered Retirement Savings Plans, Tax Free Savings Accounts, trust accounts and more — to a maximum of $100,000 each, with principal and interest included. Joint accounts are treated as one account, rather than separately for each depositor. For deposits held in trust, each beneficiary is protected up to the $100,000 limit.

“For many Canadians, protecting their savings from loss becomes as important as growing their money.”

Protected deposits include savings and chequing accounts, term deposits, like Guaranteed Investment Certificates (GICs) with a term to maturity of five years or less, money orders, bank drafts, and certified cheques.

CDIC is a federal Crown corporation, not a financial institution or private insurance firm. Customers do not pay to enroll. Member institutions pay annual premiums and coverage is automatic — you don’t have to sign up.

This means that over 97 percent of personal deposits in member institutions are protected by CDIC. If a member institution gets into financial difficulty, CDIC is ready to respond quickly to ensure depositors have rapid access to their money.

Estimating your coverage

But, some financial products are not CDIC-protected. What’s not covered includes securities and investments, like foreign currency, including U.S. dollar accounts, stocks and bonds, mutual funds, and term deposits longer than five years.

To help explain how coverage works, the corporation has an estimator on its website, including mobile apps for iOS, Android, BlackBerry and Windows Phone, that help to understand how much of your assets are covered. The corporation’s website also offers a special section on the role of deposit insurance in retirement planning.

Deposit protection is particularly important for Canadians aged 50 and older, since they have more savings to lose in a failure, and less working years to recover these lost funds. “The years between 55 and 65 are critical because this period is when most household need to convert some of their assets into an income stream,” says Brad Evenson, CDIC’s Director of Communications.“This might mean downsizing their family home, or selling equities or other investments. And, often this money is held in deposit products such as GICs.”

In addition, as we age, our risk tolerance tends to change. For many Canadians, protecting their savings from loss becomes as important as growing their money. Mr. Evenson suggests visiting the site to see how CDIC can help provide peace of mind at any stage of your financial life.