What Does Window Guaranteed Investment Contract Mean?
A window guaranteed investment contract is a type of investment plan where a person makes a series of payments to an insurance company who guarantees the principal and interest rate and returns the principal and interest accrued at a later date. Resembling certificates of deposit offered by banks, these types of plans carry low risk and therefore offer modest returns. Moreover, they differ from other guaranteed investment contracts (GIC) in the series of payments made over time instead of one lump sum.
Insuranceopedia Explains Window Guaranteed Investment Contract
The “window” refers to the time period during which the investor can make contributions and enjoy the guaranteed interest rate. Despite being guaranteed by the insurer, the United States government does not back them as they would certificates of deposit, for instance. In the event the insurer becomes insolvent, the investment could lose all of its worth. Nevertheless, small businesses, new plan start-ups, and companies looking for a fixed and guaranteed rate find window GICs a viable option. Generally, they are meant as retirement plans in defined contribution and 401(k) plans.