What are the limitations and exclusions in standard bank deposit insurance policies under the Canadian Deposit Insurance Corporation Act?
The objects of the Canada Deposit Insurance Corporation ("CDIC") are:
(a) to provide insurance against the loss of part or all of deposits;
(b) to promote and otherwise contribute to the stability of the financial system in Canada;
(c) to pursue the objects set out in paragraphs (a) and (b) for the benefit of persons having deposits with member institutions and in such manner as will minimize the exposure of the Corporation to loss; and
(d) to act as the resolution authority for its members (s.7). (Canada Deposit Insurance Corporation Act, RSC 1985, c C-3)
Deposit insurance protects a person's financial savings if their financial institution fails. Deposit insurance does not require an application or payment because the CDIC automatically insures eligible deposits. This applies to deposits held at CDIC member institutions in Canada, which include banks, federally-regulated credit unions, as well as loan and trust companies. The CDIC insures eligible deposits separately up to $100,000. If a financial institution fails, no claim needs to be filed because the CDIC will pay out automatically. (Deposit insurance, Government of Canada)
Deposit insurance covers the following types of deposits:
• savings and chequing accounts,
• Guaranteed Investment Certificates (GICs) and other term deposits, and
• foreign currency (for example, USD). (Deposit insurance, Government of Canada)
However, deposit insurance does not cover the following:
• mutual funds,
• stocks,
• bonds,
• Exchange Traded Funds (ETFs),
• cryptocurrencies, or
• losses due to fraud or theft. (Deposit insurance, Government of Canada)
The CDIC thus protects eligible deposits held in CDIC member institutions. Specifically, it insures eligible deposits for up to $100,000 (including principal and interest) at each member institution, for each of the following categories:
• Deposits held in one name: CDIC insures eligible deposits held in the name of one depositor separately from other categories up to $100,000.
• Deposits held in more than one name: Joint deposits are those held in the names of two or more people. Coverage for joint accounts is for a total of up to $100,000 regardless of the number of joint depositors.
• Deposits held in a registered retirement savings plan (RRSP): Eligible deposits in a RRSP are protected up to $100,000 separately from eligible deposits in other categories.
• Deposits held in a registered retirement income fund (RRIF): Eligible deposits in a RRIF are protected up to $100,000 separately from eligible deposits in other categories.
• Deposits held in a tax-free savings account (TFSA): Eligible deposits in a TFSA are protected up to $100,000 separately from eligible deposits in other categories.
• Deposits held in a Registered Education Savings Plan (RESP): Eligible deposits in a Registered Education Savings Plan (RESP) are protected up to $100,000 per beneficiary, separately from eligible deposits held in other categories.
• Deposits held in a Registered Disability Savings Plan (RDSP): Eligible deposits in a Registered Disability Savings Plan (RDSP) are protected up to $100,000 per beneficiary, separately from eligible deposits held in other categories.
• Deposits held in trust: CDIC insures up to $100,000 for each beneficiary named in a trust, provided certain disclosure rules are met. (How deposit insurance works, Canada Deposit Insurance Corporation)
Additionally, as of April 1, 2023, deposits held in First Home Savings Accounts (FHSA) will be separately insured for up to $100,000 (principal and interest combined) at each CDIC member institution. (How deposit insurance works, Canada Deposit Insurance Corporation)
Every member institution is deemed to have obtained a policy of deposit insurance on the day on which it became a member institution (s.17.2). (Canada Deposit Insurance Corporation Act, RSC 1985, c C-3)
Section 7 of the Canada Deposit Insurance Corporation Act, RSC 1985, c C-3, states:
Objects
7 The objects of the Corporation are
(a) to provide insurance against the loss of part or all of deposits;
(b) to promote and otherwise contribute to the stability of the financial system in Canada;
(c) to pursue the objects set out in paragraphs (a) and (b) for the benefit of persons having deposits with member institutions and in such manner as will minimize the exposure of the Corporation to loss; and
(d) to act as the resolution authority for its members.
Section 17.2 of the Canada Deposit Insurance Corporation Act, RSC 1985, c C-3, states:
Policy of deposit insurance
17.2 Every member institution is deemed to have obtained a policy of deposit insurance on the day on which it became a member institution.
General principles of deposit insurance in Canada are discussed in Deposit insurance, Government of Canada:
What is deposit insurance
Deposit insurance protects your savings if your financial institution fails.
You don’t have to apply or pay for deposit insurance. The Canada Deposit Insurance Corporation (CDIC) automatically insures your eligible deposits. This applies to deposits held at CDIC member institutions in Canada.
[...]
What deposit insurance covers
CDIC insures eligible deposits separately up to $100,000.
Deposit insurance covers the following types of deposits:
• savings and chequing accounts
• Guaranteed Investment Certificates (GICs) and other term deposits
• foreign currency (for example, USD)
If your financial institution fails, you don’t have to file a claim. CDIC will pay you automatically.
[...]
What deposit insurance doesn’t cover
Deposit insurance doesn’t cover the following:
• mutual funds
• stocks
• bonds
• Exchange Traded Funds (ETFs)
• cryptocurrencies
• losses due to fraud or theft
The categories and coverage offered by the Canada Deposit Insurance Corporation are set out in How deposit insurance works, Canada Deposit Insurance Corporation:
We protect your eligible deposits that are held in our CDIC member institutions. Many people deposit money into more than one account or financial product. We insure eligible deposits for up to $100,000 (including principal and interest) at each member institution, for each of the following categories:
Coverage and Categories
Deposits held in one name
CDIC insures eligible deposits held in the name of one depositor separately from other categories up to $100,000.
Deposits held in more than one name
Joint deposits are those held in the names of two or more people. Coverage for joint accounts is for a total of up to $100,000 regardless of the number of joint depositors.
Deposits held in a registered retirement savings plan (RRSP)
Eligible deposits in a RRSP are protected up to $100,000 separately from eligible deposits in other categories.
Deposits held in a registered retirement income fund (RRIF)
Eligible deposits in a RRIF are protected up to $100,000 separately from eligible deposits in other categories.
Deposits held in a tax-free savings account (TFSA)
Eligible deposits in a TFSA are protected up to $100,000 separately from eligible deposits in other categories.
Deposits held in a Registered Education Savings Plan (RESP)
Eligible deposits in a Registered Education Savings Plan (RESP) are protected up to $100,000 per beneficiary, separately from eligible deposits held in other categories.
Deposits held in a Registered Disability Savings Plan (RDSP)
Eligible deposits in a Registered Disability Savings Plan (RDSP) are protected up to $100,000 per beneficiary, separately from eligible deposits held in other categories.
Deposits held in trust
CDIC insures up to $100,000 for each beneficiary named in a trust, provided certain disclosure rules are met.
[...]
As of April 1, 2023, deposits held in First Home Savings Accounts (FHSA) will be separately insured for up to $100,000 (principal and interest combined) at each CDIC member institution. The addition of the FHSA category complements a series of other recent changes to enhance CDIC deposit protection to reflect how Canadians bank and save.
Deposit insurance, Government of Canada
How deposit insurance works, Canada Deposit Insurance Corporation
