Refer to this page on the CDIC website.
It is not clear to me whether CDIC will just insure the principal that I put in my TFSA GIC or also the interest earned. i.e If I open a GIC with a bank at 2% interest and I put $1000 and the bank goes bankrupt, will I get back $1000 or $1020?
From CDIC's site:
Is interest on a savings account or term deposit included in the coverage? How is the interest calculated in the event of a failure?
CDIC insures eligible deposits at each CDIC member institution up to a maximum of $100,000 (principal and interest combined).
Accrued interest (monthly or annually), will be calculated on eligible deposits up to the date of the deposit insurance payment or the date on which a court application is filed to wind up the failed institution, whichever comes first, and will be included in the deposit insurance payment, subject to coverage limits.
Thus, for the case you specify, you'd have to include dates as if the bank goes bankrupt very close to the end of the first year, then 1020 would come back, assuming the GIC matures in 5 years or less which is another condition on what CDIC covers, though if the bank goes bankrupt in the first month, 1000 would likely be returned as no interest has accrued yet.
