As a finance expert, I often get asked whether Scotiabank’s Guaranteed Investment Certificates (GICs) and mutual funds qualify for Canada Deposit Insurance Corporation (CDIC) protection. Since Scotiabank operates in both Canada and the U.S., understanding deposit insurance coverage is crucial—especially for U.S. investors who may not be familiar with CDIC rules.
Table of Contents
Understanding CDIC vs. FDIC: Key Differences
Before diving into Scotiabank’s products, it’s essential to distinguish between CDIC (Canada) and FDIC (U.S.) deposit insurance.
| Feature | CDIC (Canada) | FDIC (U.S.) |
|---|---|---|
| Coverage Limit | C\$100,000 per insured category | \$250,000 per depositor, per bank |
| Eligible Accounts | Savings, chequing, GICs, term deposits | Savings, chequing, CDs, money market accounts |
| Exclusions | Mutual funds, stocks, ETFs, crypto | Mutual funds, stocks, bonds, crypto |
| Funding Source | Member banks pay premiums | Member banks pay premiums |
Key Takeaway: CDIC and FDIC function similarly but differ in coverage limits and eligible products.
Are Scotiabank GICs Covered by CDIC?
Yes, Scotiabank GICs are CDIC-insured up to C\$100,000 per depositor, per insured category. However, nuances exist:
- Term Length Matters
- CDIC covers GICs with terms up to 5 years.
- If you hold a 7-year GIC, only the first 5 years are covered.
- Multiple GICs & Categories
- CDIC insures GICs under the “term deposit” category.
- If you hold two 1-year GICs worth C\$60,000 and C\$50,000, only C\$100,000 is insured.
Example Calculation:
Suppose you invest C\$120,000 in Scotiabank GICs:
- C\$100,000 = Insured
- C\$20,000 = Uninsured
Are Scotiabank Mutual Funds CDIC-Eligible?
No, mutual funds are not CDIC-insured. Here’s why:
- CDIC only covers deposit products (GICs, savings accounts).
- Mutual funds are investment products, exposing you to market risk.
- Even money market mutual funds, which seem “safe,” are excluded.
Comparison Table: GICs vs. Mutual Funds
| Feature | GICs (CDIC-Insured) | Mutual Funds (Not Insured) |
|---|---|---|
| Risk Level | Low (fixed return) | Medium to High (market-dependent) |
| Liquidity | Locked until maturity | Redeemable anytime (with fees) |
| Returns | Fixed interest rate | Variable (based on performance) |
U.S. Investor Considerations
Since I’m writing for a U.S. audience, it’s worth noting:
- Currency Risk
- CDIC covers Canadian dollars (C\$).
- If the Canadian dollar weakens, your USD-equivalent coverage shrinks.
- Tax Implications
- GIC interest is taxable in both Canada and the U.S.
- U.S. investors must file IRS Form 8938 if holding foreign accounts over \$50,000.
Alternatives for Higher Coverage
If CDIC limits concern you, consider:
- Spreading deposits across multiple CDIC-member banks.
- Using U.S. FDIC-insured CDs instead (if investing in USD).
- Diversifying with non-insured but low-risk bonds.
Final Verdict
- Scotiabank GICs = CDIC-insured (up to C\$100,000).
- Scotiabank mutual funds = No CDIC coverage.
For U.S. investors, weighing currency risk and tax implications is crucial. If safety is your priority, GICs are a better fit. If you seek growth, mutual funds offer higher potential returns—but with added risk.
