FAQ: Understanding Depositor Insurance in Canada - GIC Wealth Management


FYI/Blog FAQ: Understanding Depositor Insurance in Canada

FAQ: Understanding Depositor Insurance in Canada

Here at GIC Wealth Management, we often receive questions regarding depositor insurance. Naturally, investors want to know whether their money will be safe “just in case” an institution fails.

To help you better understand how depositor insurance in Canada works, here is a simple and straightforward overview:

What is depositor insurance?

Depositor insurance protects you against the loss, in whole or in part, of deposits made at member institutions in the event that they fail.

Do financial institutions routinely fail?

No. Canada has a fundamentally strong banking infrastructure, and institutional failures are rare. However, it is nevertheless a remote possibility, which is why depositor insurance exists.

What financial institutions offer depositor insurance?

Hundreds of banks, trust companies, loan companies, insurance companies, credit unions and caisses populaires across Canada offer depositor insurance.

Is all depositor insurance the same?

No. Basically, there are four types of deposit insurance that you should be familiar with:

• Coverage provided by the Canada Deposit Insurance Corporation (CDIC), which is a federal Crown corporation.
• Coverage provided by the Deposit Insurance Corporation of Ontario (DICO), which is an Ontario provincial agency.
• Coverage provided by Assuris, which is a non-profit organization under Canadian Federal regulation to protect policyholders in the event that a life insurer should become insolvent.
• Coverage provided by private corporations in various provinces (e.g. the Deposit Guarantee Corporation of Manitoba), which are mandated to ensure that credit unions and caisses populaires operate under sound business practices, and follow transparency rules regarding reporting, auditing, compliance, and so on.

What depositor insurance is the “best”?

This question triggers considerable debate. Many people believe that CDIC and DICO protection are the “safest,” because they are backed by government (federal for CDIC, and provincial for DICO).

Naturally, any investment backed by the government is going to be safe. But this doesn’t mean that
investments backed by private provincial corporations and Assuris, respectively, are risky and exposed — because they are not.

To date, no member of a credit union or caisses populaires has lost a cent (of covered/insured funds) because of a failure — which itself is a rare occurrence. In virtually all cases, institutions in distress merge with a larger entity, which results in no negative impact to members (in fact, they often benefit from additional products and services).

And in the history of Assuris, only four insurance companies have failed — resulting in zero losses to Assuris-covered customers.

In our view, the short answer to which is the best protection is: all of them, because they all work together to ensure consumer confidence.

What is covered through depositor insurance?

The four types of depositor insurance noted above (CDIC, DICO and corporation-backed) offer different levels of protection.

CDIC insures eligible deposits for up to $100,000, including GICs with terms of five years or less. To see what’s covered by CDIC, visit: http://www.cdic.ca

DICO insures eligible deposits for up to $250,000 (this increased from $100,000 on January 1, 2018), including GICs for any term length. To see what’s covered by DICO, visit: https://www.dico.com

Assuris guarantees all policy holders that if their life insurance company fails, your accumulation annuity (or deposit product, GIC), will be transferred to a solvent company, retaining 100% of the value up to $100,000. To see what’s covered by Assuris, visit: http://www.assuris.ca.

Corporations in other provinces offer different levels of depositor insurance, with some offering unlimited coverage. Click below to learn more about each program:

Who pays for depositor insurance?

Financial institutions pay for depositor insurance (and in the case of Assuris, insurance companies pay). Protection is automatically provided on eligible deposits/policies. You do not have to apply for it separately.

How do I ensure that my deposits are fully covered?

Your deposits will be covered if they are within eligible limits imposed by the respective depositor insurance program (CDIC, DICO, private corporation, Assuris).

How can GIC Wealth Management help me?

Ensuring that all of your deposits are fully covered can be easier said than done; especially if you are making several GIC investments.

At GIC Wealth Management, we will clearly map out your GIC investment options to help you get the insurance coverage you want and need. This may involve purchasing several GICs from multiple financial institutions, or if you wish, looking at options in other provinces.

Also keep in mind that our service is offered to you at no cost. We do not charge for our consulting, or for handling all of the details for your GIC purchase. We are registered brokers, which means that we are paid directly by GIC issuers.

Learn More

To learn more, contact us today toll free at 1-866-2-BUY-GICs (228-9442), or email us through our website here. We’ll respond to you promptly and look forward to answering all of your depositor insurance (and other) questions clearly and thoroughly. Our experience is your advantage.