Guaranteed Investment Certificates (GICs)
What is a Guaranteed Investment Certificate (GIC)?
A guaranteed Investment Certificate (GIC) is a type of secured investment. When you buy a GIC, you are loaning money to the financial institution that issued the GIC (the “issuer”). In return, you are guaranteed principal protection and the potential for interest on the investment over a term. GICs can be held in a CDIC deposit insurance category, but a GIC is not a category – it is a deposit type.
You can buy CDIC-protected GICs straight from CDIC-insured issuers (member institutions). or through a third-party, for example, a broker or investment advisor if they are issued by a member institution.
How CDIC insures GICs
CDIC insures GICs up to the maximum amount per eligible category if they are:
- issued by a CDIC member institution; and
- are held within a CDIC deposit insurance category.
If these requirements are met, the GIC is eligible for coverage, even if purchased through an institution that is not a CDIC member.
Example of GICs purchased directly from a member institution
William banks with two member institutions. Member institution A and member institution B. He has GIC deposits with both institutions. Here is what does (✓) and does not (✗) qualify for coverage.
This is what William has in the in one name insurance category at member institution A:
- $90,000 in a GIC
- $20,000 in cash deposit
- $40,000 in mutual funds
Total deposits held in one name at member institution A
$150,000
Eligible deposits
$110,000
Protected by CDIC
$100,000
The GIC and cash deposit are eligible deposits and are combined for up to $100,000 in CDIC coverage because they are in the same category. The remaining $10,000 in eligible deposits is over the coverage limit. Mutual funds are not eligible for coverage.
This is what William holds in the in one name insurance category at member institution B:
- $80,000 in a GIC
- $20,000 in a GIC
- $10,000 in stocks and bonds
Total deposits held in one name at member institution B
$110,000
Eligible deposits
$100,000
Protected by CDIC
$100,000
Both GICs are eligible for coverage and are combined up to $100,000 since they are held in the same coverage category. Stocks and bonds are not eligible for CDIC coverage.
William is protected up to $100,000 per category, per member institution. In this example, he has $200,000 of coverage in one name across both member institutions.
Example of GICs purchased through a broker or investment advisor
GICs purchased through a broker or investment advisor can be held at an issuing CDIC member:
- in your name (i.e., in client name) or;
- in your broker’s name as your nominee (i.e., in nominee name as deposits ‘held in trust’ for you)
Placed in your broker’s name as your nominee: CDIC considers GICs held by your broker as a nominee as a deposit held in trust. If your broker follows disclosure rules, CDIC protects deposits held in trust separately up to $100,000 per beneficiary.
Placed in your name: Eligible deposits, including GICs, placed by a broker in your name at a member institution are combined with other deposits in the same insurance category you may have directly purchased in your name for up to $100,000 with that member.
Example
Sydney banks with member institution A and has a GIC and other deposits in her name. Here is what does (✓) and does not (✗) qualify for coverage.
This is what Sydney has in the in one name insurance category at member institution A:
- $9,000 in a GIC placed by a broker in her name
- $2,000 in cash deposit
Total deposits held in one name
$11,000
Eligible deposits
$11,000
Protected by CDIC
$11,000
Sydney’s GIC is combined with her cash deposits held in the in one name insurance category and is protected up to $100,000.
When you buy GICs through brokers or investment advisors, here are a few questions you should ask:
- Which financial institution issued the GIC?
- Is the issuing institution a CDIC member?
- Is the GIC eligible for CDIC protection?
- Is the GIC held in my name or in the broker’s name on my behalf?
Deposit insurance is free and automatic.
Our calculator can help you understand coverage. Protection is based on several deposit categories that keep your money safe throughout your life.
Calculate your coverage