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Canadian Deposit Protection

The Canadian Deposit Insurance Corporation (CDIC) is a crown corporation that provides deposit protection for customers of banks, trust and loan companies.

Member Companies – The CDIC and Quebec Deposit Insurance Board (QBID) provides protection for its members, who must be banks, trust or loan companies. Since financial institutions are not required to be members, one cannot assume that because a company takes deposits, it is covered. Most large financial institutions are members, but if there is any uncertainty, one can review the list on Canadian Deposit Insurance Corporation website.

Assets Covered – The maximum coverage is $100,000 per depositor. The following accounts are covered:

• chequing and savings accounts
• term deposits and guaranteed investment certificates
• traveler’s cheques and money orders

Assets Not Covered – There are numerous restrictions imposed by the CDIC. There is no coverage on the following types of assets:

• term deposits with a maturity date in excess of five years
• deposits in a foreign currency
• treasury bills
• investments in stocks or mutual funds
• mortgages or debentures issued by a bank

Multiple Coverage – Although the basic rule is $100,000 of principal and interest coverage per depositor, separate protection is provided for joint accounts, “in-trust” accounts, registered retirement savings plans and registered retirement income funds. However, only investments that meet the previously outlined criteria will be covered. For example, a GIC contained in an RRSP would be covered, but not a T-Bill.
To qualify for joint account coverage, in addition to one’s individual accounts, the following three conditions must be met:

1) the financial institution’s records must state the deposits are jointly owned;
2) the name and address of each joint owner must be specified in the records of the financial institution; and
3) all joint owners must have an ownership interest in the funds.

Sundry Issues – Many individuals that lost money resulting from the failure of a financial institution, often invested in a small financial institution in order to receive a slightly higher rate of interest than was being offered by the large banks and trust companies. Although failures of Canadian bank and trust companies are rare, we do have a history of such failures. Investors should not deposit money with financial institutions that are not covered by deposit insurance. Consideration can be given to spreading deposits among various financial institutions to increase the level of protection. For example, if an individual had $120,000 in an account with the Bank of Montreal, only $100,000 would be covered by deposit insurance. However, if $100,000 was maintained in the Bank of Montreal and $20,000 in TD Canada Trust, the entire $120,000 would be covered by deposit insurance. If an individual is considering putting money in various financial institutions to obtain additional deposit protection, ensure the money is placed in different companies, rather than branches of the same institution. For example, assume an individual placed $80,000 in a branch of the Bank of Montreal in his neighbourhood and an additional $80,000 in another branch of the same bank. In this situation, the individual’s coverage is only $100,000 on the extremely remote chance the Bank of Montreal will ever require assistance from the CDIC.
In case of a failure of the financial institution, individuals do not have to file a claim. Rather, the CDIC will contact insured depositors and advise them how to receive a return of their insured funds.

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