24 — Sunday, September 11, 1994 ~ North Shore News Review your investments for coverage guarantees Russell Moldowan THE BOTTOM LINE CANADA IS fortunate enough io have one of the most stable banking and insurance industries in the world. Unfortunately, the past few years tarnished an otherwise out- standing record. There have been other failures of financial institu- tions here, but none as big or at such a large institution as the recent Confederation Life collapse. It is for this reason that I want to address Canada Deposit Insurance Corporation (CDIC), Compcorp and their protection for Canadian depositors and investors, as well as the limitations of CDIC insurance and Compcorp protec- tion for low-risk and no-risk investors. CDIC is a crown corporation, created in 1967. Members include banks, trust companies, loan and . finance companies. Deposits insured.by CDIC include savings and chequing accounts, term deposits, GICs, and money orders. Your deposits are insured if they are payable in Canadian dol- lars and mature within five years from the date of deposit. Examples of deposits that would not be cov- ered include: U.S. dollar accounts, term deposits that are more than five years to maturity, debentures issued by a chartered bank, govern- ment bonds and debentures, T- Bills, Mutual Funds, Mortgage- Backed Securities and the like. Some of these investments that are not covered by CDIC have other guarantees, Aithough many people know that CDIC provides $60,000 cover- age, it is not widely known that this coverage is per institution. If you have more than $60,000 with any financial institution, you should consider spreading it out if safety is a concern. Exceptions to this are joint deposits, trust deposits and registered plans. If at one institution you hold $60,000 in each of a savings account, a trust account for another person, an RRSP, and an RRIF, you would be covered for $240,000. Also, if you have a joint account, the deposit is covered. Instead of limited coverage, some deposits and investments available through investment deal- ers are covered by the guarantees of governments and government agencies. These guarantees have no maximums and require no mem- bership by the offering institution, unlike CDIC coverage. MBSs, government bonds and bonds issued by government agencies, treasury bills and coupons carry the guarantee of payment of principal and interest. You should consult a qualified, full-service investment adviser to find out more about the limitations of CDIC and the advantages of guaranteed investments. Insurance companies have their own type of insurance through an association of insurers called Compcorp. This protection covers $200,000 of life insurance, $60,000 of registered savings, $60,000 of non-registered savings, $2,000 of monthly income, and $60,000 of health insurance. There are over 200 member companies in Canada, with protec- tion being automatic. Like CDIC, the insured deposits must be in Canadian dollars, and the policy holder must have been a Canadian resident when the policy was issued. Unlike CDIC, federal regula- tions make it mandatory for all insurers to be protected by Compcorp, but there are circum- stances where the coverage may not be full. For example. if a policy promis- es an interest rate that is signifi- cantly out of line with the rest of the industry, Compcorp may only ensure the payment of interest and principal to a more reasonable rate. Unlike CDIC, Compcorp does not have the ultimate guarantee of the Federal government, so it is possi- ble that it may not be able to fulfill its obligations. However, it may assess its members any amount so that it can meet its obligations. The above information should give you a better understanding of 66 /f you have more than $60,000 with any financial institution, you should consider spreading it out. 99 the guarantees and insurance avail- able to depositors, policy holders and investors. The Bottom Line is: you should review your investments to make sure you are within the bounds of CDIC and Compcorp coverage. {f they are not, you should restructure your investments to get full cover- age, or consider other investments that can give you a better return. A qualified, full-service invest- ment adviser can give you access to all three types of guaranteed investments. Russell Moldowan is an invest- ment adviser in Vancouver. He advises on investment management and retirement planning. Call ar write to Russell at (604) 661-7475, P.O. Box 10342, Pacific Centre, Vancouver, B.C., V7Y 1H6. 9.01% B.C. GOVT. BONDE... 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