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Deposit Insurance: A Strong Case for Diversification

As a professional in the financial sector, it's essential to have a thorough understanding of deposit insurance. It's not only a requirement but also a responsibility to comprehend how deposit insurance plays a crucial role in protecting the investments of millions of customers.

Let's dive deep into its role and relevance in the world of deposit insurance and why diversification is so important.

What Is Deposit Insurance?

Deposit insurance protects depositors from bank insolvencies, ensuring their funds are safe and retrievable even in turbulent times. This system increases trust and encourages investment in the banking sector by providing deposit insurance.

Who Protects Your Investments?

Many countries have a specific organization that safeguards the funds of depositors. For example, in the US, this organization is the FDIC; in the UK, it's the FSCS; and in Canada, it's the Canada Deposit Insurance Corporation (CDIC). These groups are crucial for maintaining the financial credibility of their respective nations. They ensure that, even in challenging times, a system is in place to protect depositors.

Although the specifics of how these organizations operate may differ from country to country, they all share a common goal: to stabilize financial markets and maintain depositors' confidence. Therefore, they are essential pillars of financial security on a global level.

What is the Canadian Deposit Insurance Corporation?

The CDIC is a federal agency that offers protection to depositors in Canada. Its primary responsibility is to instill confidence in the public by ensuring that their deposits in banking institutions are backed by a reliable system.

Not all financial establishments are covered by the CDIC. It’s important for depositors to distinguish between member and non-member institutions to guarantee the safety of their deposits.

What Is Covered?

The CDIC protects various deposit types, including checking accounts, safeguarding everyday banking activities. Its broad coverage is essential for the Canadian banking system.

Here’s a list of what the CDIC covers:

  • Savings accounts
  • Checking accounts
  • Guaranteed investment certificates (GICs) and other term deposits
  • Money orders
  • Bank drafts
  • Certified checks
  • Foreign currency

This list showcases the CDIC's comprehensive approach to deposit protection. [1]

What Is Not Covered?

It's important to note that not all financial instruments are protected by the CDIC, including mutual funds and cryptocurrencies, which are riskier and more volatile.

Here’s a list of what the CDIC doesn’t cover:

  • Mutual funds
  • Stocks
  • Bonds
  • Exchange-traded funds (ETFs)
  • Cryptocurrencies

Understanding these nuances of what the CDIC does and does not cover can help investors make informed decisions. [1]

What Are the CDIC’s Coverage Limits?

Depositors can rest assured with the CAD $100,000 limit, including the initial deposit and any interest earned. This limit offers a significant safety net that balances protection and fiscal responsibility. By ensuring coverage on a per-account basis, wise investors can strategically place deposits across various account types to maximize their protective coverage. [1]

Do You Pay or Apply for CDIC Coverage?

When you deposit at a CDIC member institution, you can enjoy the benefits of protective coverage without any hassle. The CDIC affiliation of member institutions is clearly displayed through physical decals at bank branches and digital badges online, which promotes transparency and helps depositors stay informed.

What Happens if Your Financial Institution Fails and It’s Not Covered by Deposit Insurance?

This is where things get confusing: institutions not covered by deposit insurance leave depositors vulnerable to losing their invested money. Let’s dive into some of the specifics.

Banks and Federal Credit Unions Use the CDIC

When navigating the financial landscape in Canada, it's essential to recognize the distinctions in deposit insurance affiliations. Traditional banks and federal credit unions align with the CDIC for deposit protection.

On the other hand, provincial credit unions, while adhering to rigorous standards, typically have their own distinct deposit insurance frameworks. This differentiation ensures robust protection for depositors across the board but also underlines the importance of understanding where and how your funds are safeguarded.

Provincial Credit Unions Have Their Own Credit Insurance

In Canada, credit unions function differently from traditional banks as they are covered by provincial deposit insurance schemes instead of the CDIC. Although these provincial systems are separate, they offer comparable deposit protection, which assures depositors based on their region.

Let’s examine some of the differences and similarities between these credit union deposit insurance protections across the Canadian provinces.





British Columbia

100% Deposit Coverage

Credit Union Deposit Insurance Corporation of B.C.


100% Deposit Coverage

Alberta Credit Union Deposit Guarantee Corporation


100% Deposit Coverage

Saskatchewan Credit Union Deposit Guarantee Corporation


100% Deposit Coverage

Deposit Guarantee Corporation of Manitoba


Chequing or savings accounts, up to $250,000. Unlimited coverage for deposits in registered accounts such as RRSPs or TFSAs.

Financial Services Regulatory Authority of Ontario


Up to $100,000 coverage deposit insurance per category with the same credit union. GICs are covered. Treasury bills, cryptocurrency, mutual funds, shares, bonds, debentures, and mortgage-backed securities are not covered.

Autorité des marchés financiers

Prince Edward Island

Up to $125,000 coverage deposit insurance with the same credit union. Unlimited coverage for deposits in registered accounts such as RRSPs or TFSAs.

Credit Union Deposit Insurance Corporation (PEI)

Nova Scotia

Up to $250,000 coverage deposit insurance and $250,000 insurance for each TFSA, RRSP, RRIF, or RESP account.

Nova Scotia Credit Union Deposit Insurance Corporation

New Brunswick

Up to $250,000 coverage deposit insurance and $250,000 insurance for each TFSA, RRSP, RRIF, or RESP account.

New Brunswick Credit Union Deposit Insurance Corporation

Newfoundland and Labrador

Up to $250,000 coverage deposit insurance and $250,000 insurance for each TFSA, RRSP, RRIF, or RESP account.

Newfoundland and Labrador Credit Union Deposit Guarantee Corporation


It's essential to recognize that there may be variations and divergences in the coverage offered by the different provincial systems. As a result, it's necessary to tailor financial strategies for credit union members accordingly. [2]

Crown Corporations

Many Crown corporations, such as ATB Financial, receive strong support from their provincial governments. This support leads to a greater level of confidence and trust from depositors, as the government acts as a guarantor of funds.

It's important to note that not all Crown entities are involved in financial services. Institutions like ATB Financial are unique in their role as both a financial establishment and a Crown entity, offering distinctive deposit solutions.

How To Invest and Protect Your Money

It's advisable for financial professionals to prioritize both financial health ratings and diversification among their investments, in addition to relying on deposit insurance for security.

Financial Health Ratings

When it comes to choosing a bank, the ratings are like a health checkup. They give you essential information about the bank's stability, financial practices, and ability to handle tough economic times. This information can help you make an intelligent decision about where to keep your money.

Here are some important factors to consider when evaluating financial institutions:

  • Capital adequacy ratio (CAR)
  • Liquidity ratio
  • Deposit insurance
  • Geographic risk
  • Historical profitability

Typically, higher ratings mean the bank is financially strong and less risky. By using these ratings as a guide, you can reduce the chances of any financial problems down the line and feel more secure about your deposits.


Investing in a diverse range of options is crucial to safeguard against unpredictable market behaviours. Credit unions are a stable and community-oriented financial option offering security and investment opportunities. They prioritize the welfare of their members and often provide returns that are comparable to traditional banks.

However, given the vast options available, many investors find it daunting to know where to begin when exploring credit union investment opportunities. This is where Yield Exchange comes in. It’s a platform that simplifies the investment process by providing access to multiple credit unions and banks. What's more, leveraging Yield Exchange doesn't introduce additional risk; it simply expands your investment opportunities to enable competitive rates and become more diversified while still offering the robustness of traditional financial protections.

Final Thoughts

Organizations like the CDIC highlight the importance of diversifying financial assets through deposit insurance. For those in the financial industry, this means more than just protecting assets but also promoting responsible financial decision-making. As the financial world changes, deposit insurance remains a steadfast principle, making a strong case for diversification.

If you’d like to learn more about how you can combine deposit insurance with your diversification strategy, reach out to our team today.

[1] Coverage may change by the CDIC at any time. Please review their site for the most up-to-date information.

[2] Coverage may change by each province at any time. Please review the most up-to-date information.