Personal Finance

How to ensure that you are protected
By Gail Bebee | 08/09/11

I suspect that recent reports of insolvent European banks have caused more than a few Canadians to wonder about the safety of our own financial institutions. What would happen if one of our banks, credit unions or investment firms went belly up and you had an account at the bankrupt firm? Would you get your money back?

About the Author
Gail Bebee is an independent personal finance speaker, teacher and the author of No Hype--The Straight Goods on Investing Your Money. She can be reached at; her website is

Fortunately, you could be fully reimbursed for your losses by one of several insurance programs which protect Canadian investors. Your compensation depends on the type of investment, the amount in your account and the institution involved.

The Canada Deposit Insurance Corp. (CDIC), a federal Crown corporation, insures savings in most Canadian banks and reimburses depositors in the event of insolvency. If a CDIC-insured firm fails, you should get your money back if your investments fall into one of the following categories:

  • savings accounts and chequing accounts;

  • GICs or other term deposits with an original term to maturity of five years or less;

  • money orders, certified cheques, travellers' cheques and bank drafts issued by CDIC members;

  • Accounts set up to pay property taxes on mortgaged properties;

  • Debentures issued by a loan company that is a CDIC member.

There are limits to the coverage. Only accounts or products held in Canadian currency are covered, and there is a limit of $100,000 of eligible savings per member institution. Fortunately, this limit is applied separately for each of these categories: savings held in one name, savings held in more than one name, savings held in trust for one beneficiary, property-tax accounts, RRSPs, RRIFs and TFSAs.

If your bank or other federally regulated financial institution is a member of CDIC, your eligible investments are covered automatically. If your bank fails, CDIC will contact you regarding the payout procedure. Visit the CDIC web site for a list of current CDIC members.

A separate deposit-insurance corporation in each province protects investors' money if a credit union, caisse populaire or provincially regulated trust or loan company fails. The guarantees against loss are similar to, and in some provinces better than, those provided by CDIC.

In Manitoba, home to credit unions with some of the highest savings-account interest rates in the country, the Deposit Guarantee Corp. of Manitoba offers an unlimited guarantee for all deposits in a Manitoba credit union or caisse populaire. The guarantee even extends to foreign-currency deposits and term deposits longer than five years.

Each provincial deposit-insurance corporation posts a directory of members and the specifics of its insurance coverage at its web site. The Financial Consumer Agency of Canada web site lists these corporations and a web link to each.

There are no deposit-insurance corporations in the three territories, where credit unions are either banned or not well established.

If you invest with a company licensed to sell mutual funds and the company goes bankrupt or becomes insolvent, you could get your money back if the firm is a member of the Mutual Fund Dealers Association of Canada.

MFDA members pay into the not-for-profit MFDA Investor Protection Corp., which reimburses clients of failed members for losses of up to $1 million. This coverage limit is applied to the total value of all general account(s) a customer holds at the failed firm. Each additional "separate account," such as an RRSP or RESP, has its own $1-million coverage limit. Securities, segregated funds, cash and other property in your account are eligible.

The bankruptcy trustee normally contacts customers of a bankrupt firm regarding the claims procedure and time limits for making a claim. For additional details and a directory of MFDA members, visit the MFDA web site. Investors in Quebec should note that mutual-fund dealers in Quebec are not covered by this insurance.

If you hold investments in an account at an investment dealer (a firm licensed to trade a broad range of investments including stocks, bonds and mutual funds), yet another insurance program protects your money in case of insolvency. The Canadian Investor Protection Fund (CIPF), set up by the Investment Industry Regulatory Organization of Canada (IIROC), covers financial losses by customers of any member company that becomes insolvent.

All IIROC members are CIPF members. CIPF provides up to $1 million in coverage for each group of customer accounts held for the same purpose. So, for example, if you had both RRSP and RRIF retirement accounts, these two accounts together would be insured for up to $1 million in losses. If your investment dealer becomes insolvent, you will be notified regarding the claims procedure either by mail or a notice in a national and/or local newspaper. The CIPF web site has more details on the insurance coverage and a list of member companies.

Certain types of investments such as segregated funds and annuities are actually forms of insurance. The insurance company that issues such policies is required by law to be a member of Assuris, a not-for-profit organization that steps in if a life-insurance company fails. Its role is to arrange the quick transfer of policies from the failed company to a solvent insurance company, where the policy's benefits will continue to be honoured.

Annuities are guaranteed up to $2,000 per month or 85% of the promised monthly payout, whichever is higher. Segregated funds are guaranteed up to $60,000 or 85% of the promised guaranteed amounts, whichever is higher. The Assuris web site provides more details on coverage and a list of member insurance companies.

We are fortunate in this country to have insurance programs that reimburse Canadian investors for some, if not all, of their losses if a financial institution becomes insolvent or bankrupt. To ensure that you can benefit from such insurance, always patronize financial institutions that are members of the investor-protection insurance program that is standard for their type of organization. Secondly, take the time to understand the rules surrounding the specific insurance program that applies to these financial institutions.

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