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Prepare to become intimately familiar with the limits of deposit insurance if you’re a downsizing baby boomer.

I’ve heard lately from several people asking what to do with the money they’ve been left with after selling the family home. Some of these people have cash remaining after buying a smaller home and some are renting, at least temporarily. Whatever the origin of this cash, the goal is the same. Keep the money safe by holding it in a savings account protected by deposit insurance.

In a recent edition of the Carrick on Money newsletter, I discussed the case of a reader whose father was about to receive $500,000 in proceeds from the sale of his home and wanted to use the funds to live in a retirement home. This reader asked whether he needs to spread the money between multiple financial institutions to get full protection from Canada Deposit Insurance Corp.

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I noted in my answer that you can have multiple accounts eligible for $100,000 of coverage each (note: that’s principal plus interest) at the same bank. For example, a tax-free savings account holding guaranteed investment certificates and a regular, non-registered savings account would each be covered. But it’s quite possible this reader’s father would need to have accounts at multiple banks to stay fully within CDIC limits.

Readers reminded me that there’s another option – use a credit union. Credit unions have their own provincial deposit-insurance plans and coverage limits can be higher than CDIC, even unlimited. For example, Ontario credit unions have a $250,000 limit, while Manitoba credit unions have unlimited coverage. Manitoba’s unlimited coverage is noteworthy because the province is home to several credit unions with online banking divisions offering excellent rates on savings accounts and term deposits.

Deposit-insurance plans have their differences, though. CDIC is a federal Crown corporation, while the Deposit Insurance Corp. of Ontario is a government agency. By contrast, the Deposit Guarantee Corp. of Manitoba is not part of the Manitoba government.

Downsizing boomers with hundreds of thousands of dollars to park do not have to subdivide their money to have it protected by deposit insurance. But they may want to anyway if they prefer deposit insurance with government backing, particularly the federal government.

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