What does CDIC and CIPF Cover?

CDIC stands for Canadian Deposit Insurance Coverage and CIPF stands for Canadian Investor Protection Fund. The last thing you want to see is your hard earned money go ‘poof’ if the financial institution that you put your money in goes insolvent or belly up. But what does CIDC and CIPF cover?

If you’re new to the investing world or you are hoarding cash in a savings account, you will probably be interested in CDIC and CIPF but may have never heard of theses acronyms before.

What is CDIC

CDIC is a federal Crown Corporation of Canada that helps support the Canadian financial system by ensuring that your deposits with financial institutions are protected (in the event of the financial institution failing).

Basically, CDIC is for your deposits. Money that you invest in cash, GIC’s, savings accounts, high interest savings accounts, term deposits are covered. Things that are NOT covered under CDIC are cryptocurrencies, stocks, bonds, and things like mutual funds. Deposit insurance is free and automatic, you don’t have to sign up for anything or pay for the CDIC coverage.

There are over 80 financial institutions that have CDIC membership and CDIC coverage. Here’s a list of the CDIC members.

CDIC covers your deposits in the event that the banking institution you have your money deposited in FAILS. Since 1967, CDIC has dealt with 43 failures and affecting 2 million people and states there has not been a single dollar that was supposed to be covered not returned to the depositors.

What does CDIC cover?

Many people are confused as to what CDIC covers. I used to think that CDIC covered just up to $100,000 of my deposits, period.

CDIC covers up to $100,000 in Canadian dollars on deposits at each financial institution and in each account.

This is great news if you move money around and sign up for new chequing account promotions.

This is also great news if you tend to keep a lot of money in your no fee bank account in Canada.

Finally, this is good news if you have multiple savings deposits to take advantage of high interest rates at places like:

• Canadian Tire high interest savings account
• Motive Savvy Savings Account
• Tangerine Bank Savings Account
• EQ Bank’s Savings Plus Account

Recently, CDIC announced that they are covered US dollar deposits too (before this was not the case) so this is great news if you have some US dollars being saved up.

There are categories that CDIC considers to be separate coverage, these are:

• Deposits in your name
• Deposits in Joint Accounts
• Cash/GICs etc in an RRSP
• Eligible deposits in an RRIF
• Deposits in a TFSA
• Eligible deposits held in Trust

It is very confusing indeed, but CDIC has a useful and easy to use CDIC calculator to input your hypothetical scenarios (none of the data is saved and you don’t put your name on there) to see whether your money is covered by CDIC.

Let’s take an example of someone with a lot of cash.

• If you had $100,000 in an RRSP savings account at EQ bank, your $100,000 is CDIC protected.
• If you had $100,000 in a non-registered savings account at EQ bank, that $100,000 deposit is also CDIC protected (it is covered because it is a different account)
• If you had $97,000 in another EQ bank account but as a joint account, then $100,000 is also covered (but up to $100,000 coverage limit per set of joint owners)
• If you have another $100,000 in a Motive Savvy Savings Account at Motive Financial, that $100,000 is covered too.
• If you have $45,000 USD in a Royal Bank US dollar savings account (or roughly $60,000 CAD dollars in foreign currency), that amount is covered too (up to $100,000 in Canadian dollars).

In the hypothetical example above (not my example, wouldn’t it be nice to be so flush with cash though), 100% of the deposits are CDIC covered, using the CDIC calculator.

Technically if you had a million dollars, you could have 10 separate accounts at different financial institutions (that are covered under CDIC) and your million dollars would be covered.

Now that we know what’s covered under CDIC, let’s go over CIPF coverage.

What is CIPF?

CIPF stands for Canadian Investor Protection Fund. It is not a Crown Corporation like CDIC is, but it is created by provincial and territorial securities regulators across Canada. It is meant to protect the investor’s property (securities, cash, etc. with certain limits) against an individual CIPF member’s insolvency. CIPF is for your investments (not your deposits).

The CIPF members pay for the CIPF funds, so you don’t have to pay for this insurance and you are automatically covered.

Here is a list of the current CIPF members in Canada. If you’re curious here’s a list of the CIPF Member Insolvencies.

Interestingly enough, Get Planswell isn’t on this list (though it is most updated to December 2019) and in fact, even more surprising, Planswell is back in business despite losing $20 million! For those of you who remember, sexual harassment plagued this company last year and the company folded.

What Does CIPF Cover?

CIPF covers your property up to $1,000,000 CAD for securities, commodity and futures contracts, segregated insurance funds or cash but does not protect the value. For example, investments held in a Tangerine Investment Fund will be covered under CIPF.

For example, if you had 100 shares of BMO within a CIPF member brokerage, and that brokerage went bankrupt or became insolvent, then you would get 100 shares of BMO returned to you.

If you had $5000 worth of BMO before the CIPF member became insolvent, it would not necessarily be $5000 returned to you, it would be just 100 shares of BMO and that could be worth $2500 when it is returned. CIPF does not guarantee the value of your investment.

Cash held within a CIPF member is covered under CIPF, and not CDIC.

CIPF Coverage Limits

Similar to CDIC, the coverage limit is ‘reset’ for each type of different account.

• $1,000,000 for combined general accounts such as cash accounts, non-registered accounts or margin accounts, TFSA accounts
• $1,000,000 for registered accounts combined (RRSP, RRIF, LIF)
• $1,000,000 for RESP if the client is the subscriber of the RESP plan

So effectively, you could have up to $3,000,000 in coverage (it would be nice to have a $1,000,000 RESP!).

CDIC vs CIPF Coverage

In general, the procedure to get your money back from CDIC vs CIPF seems quite different. For CDIC, you don’t have to do anything and CDIC will contact you. For CIPF, you have to submit a claim within 180 days of the member becoming insolvent. Here’s the CIPF Claims Procedure.

The CIPF claims procedure seems quite involved (e.g. headache inducing) compared to CDIC. First, you have to initiate the claim yourself, then you have to make sure you have the most recent financial statement from your insolvent investment institution, and then you only get the property (# of shares of ETFs or securities) and not the actual value.

Because of this, I think this is a good lesson to be wary and careful of money invested in your investment accounts and to make sure the company you invest with is reputable and safe.

Hope you enjoyed this post on what does CIPF and CDIC cover and hope it adds some clarity to the sometimes murky waters of what is included in CDIC and CIPF coverage.

Have you ever had a financial institution go belly up on you?