Understanding the CDIC Coverage: What You Need to Know

What coverage does the CDIC have?

• A. Insures eligible deposits of up to $75,000 per depositor
• B. Insures eligible deposits of up to $100,000 per depositor
• C. Insures eligible deposits of up to $150,000 per depositor
• D. Insures eligible deposits of up to $200,000 per depositor

Answer: (B)

The correct answer is B. The Canada Deposit Insurance Corporation (CDIC) provides insurance coverage for eligible deposits of up to $100,000 per depositor. This means that if a financial institution that is a CDIC member were to fail, each individual depositor would be insured for up to $100,000 of their deposits. This protection helps to ensure the safety and security of depositors' funds in the event of a bank failure. Options A, C, and D are incorrect because they provide coverage amounts that exceed the $100,000 limit that the CDIC offers per depositor. It's important for investors to be aware of the coverage limits provided by the CDIC to make informed decisions about how to protect their deposits.

When it comes to safeguarding your hard-earned money, understanding deposit insurance is absolutely vital. You might be asking yourself, “What’s the best way to ensure that my savings are safe?” Enter the Canada Deposit Insurance Corporation, commonly referred to as CDIC. This little gem of a facility plays a significant role in keeping depositors secure by insuring eligible deposits within its affiliates. But, before we get too deep into the nitty-gritty, let's clarify something right off the bat: the coverage limit is $100,000 per depositor. That’s right.

So, if you're banking with a CDIC member institution and, let’s say, that bank hits a bump in the road—like, oh I don’t know, going belly-up—your deposits up to that sweet spot of $100,000 are insured. This means your funds are protected, helping to alleviate some of the anxiety that naturally accompanies financial markets.

Now, that's all well and good, but you might be wondering, "What about larger deposits or how does this insurance coverage work in practice?" Let’s break it down a bit. Each depositor gets that $100,000 coverage limit per financial institution. But if you’ve got money spread out across different banks or credit unions, congratulations! You could essentially multiply that coverage. For instance, if you have $100,000 in three different CDIC-insured institutions, all three are covered—potentially giving you up to $300,000 in total protection.

However, it’s crucial to remember that not all types of deposits are eligible. CDIC covers savings accounts, chequing accounts, and term deposits, but other options, like stocks and bonds, don’t fall under their insurance umbrella. So if you're investing in stocks or other securities, you’ll want to explore different insurance avenues, like the Canadian Investor Protection Fund (CIPF) for investment accounts.

On the flip side, options A, C, and D from the exam question you may have seen are not correct—those coverage amounts exceed the $100,000 limit that the CDIC sets. Knowing what you’re covered for is key to making better financial decisions. After all, who wouldn’t want to sleep easier knowing their money is protected?

So next time you’re navigating through the sea of banking options, keep CDIC in your back pocket. It’s not just a government body; it's your partner in financial peace of mind. In the face of uncertainty, knowing your deposits have a safety net feels like having a trusty life preserver while sailing through turbulent waters. Always remember: informed decisions lead to better outcomes. Now that’s a nugget of wisdom you can take to the bank—literally!