CDIC Protection: It's Like Money in the Bank
If you think banks fail only in the movies, preferably old movies, shot in grainy black-and-white, think again.
After all, as the recent financial crisis has shown, even the best financial institutions may look great – on paper. But if there's no real currency behind that paper, you're staring disaster straight in the eye.
Not to worry, most Canadian financial institutions will tell you. We're insured and, by extension, so are you.
Indeed. But you need to know that certain things are insured, and others not.
Here's a primer on what is and what is not insured automatically under the law, and what you can do to find peace of mind (leaving your accounts undisturbed all the while).
First and foremost, when picking a financial institution to look after your money, check whether they are a member of CDIC, an abbreviation for Canada Deposit Insurance Corporation. This outfit insures your accounts with member financial institutions up to $100,000.
The paranoid amongst us may ask: and what if the CDIC fails, too? If THAT were to happen, you might expect Canada to fail financially as a country: CDIC was created in 1967 by Parliament, so, it can rely on whatever funds the federal government holds.
In addition to selecting financial institutions that are members of CDIC, you should be aware that not everything is covered by the CDIC.
Here's the list of what's covered, with links to CDIC's explanations:
- savings and chequing accounts
- GICs or other term deposits with an original term to maturity of 5 years or less
- money orders, certified cheques, travellers' cheques and bank drafts issued by CDIC members
- accounts that hold realty taxes on mortgaged properties
If you any of your accounts is in any foreign currency, even if it's as strong as Swiss franc, CDIC will NOT insure it. Neither will it insure the following (again, with links):
- mutual funds and stocks
- GICs and other term deposits with a date to maturity of more than 5 years
- Treasury bills
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