The CDIC was established in 1967. It is neither a private insurance firm nor a financial institution. It is a crown company that does not make a profit and is established to safeguard Canadians. More than eighty financial institutions that are members of the CDIC provide funding for the organization, which protects Canadians' savings in case a bank fails.
What Does CDIC Mean?
The CDIC abbreviation is the one that is most often seen in printed form. If you see the letters CDIC on the website of a financial institution or anywhere else related to your finances and banking, this indicates that the institution is a member of the CDIC.
How Does CDIC Insurance Work?
Insurance from CDIC is a no-cost service; thus, there is no need to pay. Your savings, up to a maximum of one hundred thousand dollars, are safeguarded since you are utilizing a financial institution that is a member of the CDIC and an account that the CDIC covers. However, you still need to study the tiny print and get familiar with the operation of the coverage.
Imagine that you have a combined amount of $150,000 in your checking account, savings account, and other accounts at the same bank. Because both accounts adhere to the CDIC's "deposits maintained in one name" criterion, you are only insured for a maximum of $100,000 if that bank goes bankrupt.
However, keep your savings and tax-free savings accounts (TFSA) at the same financial institution. In that case, you are protected for up to $100,000 in each account since these two types of accounts are considered distinct categories. Similarly, both financial organizations collapse if you have a checking account with one financial institution and a saving account with another. You are eligible to claim both of your accounts since they are held at distinct financial institutions.
What Are The Repercussions If The Bank Or Other Financial Institution Fails?
If one of our members' banks fails, the CDIC acts as a resolution authority for all our other members. The following is a list of their goals in terms of the resolution:
- Protect eligible deposits
- Ensure that essential financial services may continue to be provided.
- Defend the economic well-being of Canada.
- Reduce as much risk as possible to taxpayers
Tools like shutting down an institution and giving back insured deposits will likely be employed in these situations. However, these instruments also include the sale of shares or assets, the merger with another financial institution, the recapitalization of existing capital, the restructuring of existing capital, or the implementation of private solutions.
On the Canadian Deposit Insurance Corporation website, a clear and comprehensive explanation of what occurs during a failure may be found. You may find some comfort in the following data, though, even though the possibility of a bank failing causes a great deal of anxiety: Since the CDIC was established in 1967, there have been 43 financial institutions that have failed, which have been responsible for the loss of more than 2 million accounts. Nobody who the CDIC protected suffered a single dollar of loss.
What Does CDIC Cover?
The CDIC will reimburse eligible deposits individually, given that most consumers have more than one account. Coverage provided by the CDIC extends to the following seven categories:
- Deposits held in an RRSP
- Deposits held in one name
- Deposits held in an RRIF
- Deposits held in more than one name
- Deposits held in a TFSA
- Deposits held in trust
The CDIC will cover up to one hundred thousand dollars per account, and this amount includes both the principle and the interest. CDIC also protects other currencies, including the US dollar. On the official website of the CDIC, you will find additional information about these particular forms of coverage.
What Banks Are Covered By CDIC?
As mentioned, the CDIC counts more than 80 financial institutions within its membership roster. These include the larger financial institutions in Canada, such as RBC, Bank of Montreal, and CIBC, as well as several online financial institutions, such as Tangerine Bank and EQ Bank, some trust firms, loan businesses, and federal credit unions. This is where you'll find the comprehensive list. You might also be on the lookout for someone wearing a CDIC credential. Members will display this emblem on their websites, on their mobile apps, and at their various branch locations.
