How Your Money Is Protected in Canada

The good news is, we live in a country with a stable financial system that is complemented by organizations that protect both individuals and the financial institutions they do business with. From your savings to your investments to your personal debt, protection is available to safeguard your money, your lifestyle and your loved ones.

Protecting Your Deposits — CDIC Deposit Insurance

The Canada Deposit Insurance Corporation (CDIC) is a crown corporation that was formed more than 50 years ago, following a period of financial instability in Canada. Since its founding, CDIC’s mission has been to protect the savings of Canadians by insuring their deposits at more than 80 member institutions. So if your financial institution closes, your money is protected.

How it works:

Eligible deposits — including money in your savings and chequing accounts, GICs, and foreign currency — are automatically covered to a limit of $100,000 per separately insured category. For instance, if you have a TFSA and a savings account each with $100,000 at a bank that is a CDIC member and the deposits are payable in Canada, your money would be fully insured if the bank goes under.

You don’t pay for CDIC coverage (your bank does), and you don’t need to make a claim to get your money back.

How you’re reimbursed:

In the event that your financial institution were to collapse, your insured funds (principal and interest) are automatically reimbursed within days. It’s therefore important to keep your contact information up to date with your bank, so that you can be contacted to get your money back as soon as possible.

What’s covered, and what’s not:

Covered:

• Savings accounts
• Chequing accounts
• GICs and other term deposits

Not covered:

• Mutual funds
• Stocks
• Bonds
• Exchange Traded Funds (ETFs)
• Crypto-currencies
• Any deposits made at institutions that aren’t members of CDIC

Protecting Your Investments — CIPF

The Canadian Investor Protector Fund (CIPF) covers the assets you own that are held by a Canadian investment dealer who is a member of the Investment Industry Regulatory Organization of Canada (IIROC). Generally offering protection to individuals of up to $1 million for all general accounts combined (such as cash accounts, margin accounts and TFSAs), up to $1 million for all registered retirement accounts combined (such as RRSPs, RRIFs and LIFs) and up to $1 million for all registered education savings plans (RESPs) combined, CIPF protects you in case your investment dealer closes. Information on coverage limits and any exceptions for individuals, corporations and other types of clients can be found on CIPF’s website at www.cipf.ca.

How it works:

CIPF covers assets that are lost due to the failure of an investment firm. If you have 100 shares of a company, for example, CIPF will work to make sure you get back those 100 shares. What it doesn’t do, is guarantee the value of your investment.

As with CDIC insurance, you don’t pay a premium for this protection — CIPF is funded by its members.

How you’re reimbursed:

When a member firm becomes insolvent, CIPF typically works with a trustee in bankruptcy to return your assets to you as quickly as possible. Since the firm you worked with can no longer hold any property, it’s usually necessary to move your assets to another investment dealer so that you can access what you own.

What’s covered and what’s not:

Covered:

• Cash
• Securities (including bonds, GICs, shares or stock of a company, units or shares of an investment fund such as mutual fund or an ETF, and units of limited partnerships)
• Future Contracts
• Segregated Insurance Funds

Not covered:

• CIPF does not cover losses resulting from a drop in the value of your investments for any reason, including poor investment advice. For instance, if your investments weren’t suitable for you or you were given misleading or incomplete information, you won’t be reimbursed for any resulting losses.

Protecting Your Personal Debt — Creditor Insurance

Creditor insurance is optional coverage that you can buy to help cover your debt balances in the case of death, disability, critical illness and in some cases, job loss. While you may be effectively managing debt today — perhaps you have a mortgage, car loan, and/or a balance on your credit card — if the unexpected happens, this debt can become an issue. Creditor insurance provides the coverage that helps prevent this debt from becoming a burden to your family.

How it works:

If you die, become critically ill or become disabled and can’t work, creditor insurance can help reduce or pay off the balance of your insured mortgage, loan, line of credit or credit card. Many credit card coverage providers also offer protection against involuntary unemployment.

You apply for creditor insurance directly through your bank or other lender, and premiums will be set depending on what you want to cover, and how much coverage you want.

How you’re reimbursed:

Depending on the type of product or lender you work with, your policy will pay out either ongoing payments or a lump sum to pay off or reduce the debt. The maximum number of payments will differ across providers too.

What’s covered:

Every policy is different, so inclusions and exceptions will vary. RBC, for instance, offers three different types of coverage:

• Mortgage balance, to help protect your home
• Loan or line of credit balance, to protect your family’s lifestyle
• Credit card balance, to help prevent debt from becoming a burden to your family

You have worked diligently to build your savings, your assets and a way of life that you love. While we are faced with challenging times, the silver lining is that the outcomes of your hard work can be protected through a variety of programs and policies.

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