Window Guaranteed Investment Contract
What Does Window Guaranteed Investment Contract Mean?
A window guaranteed investment contract is a type of investment plan in which a person makes a series of payments to an insurance company, which guarantees both the principal and the interest rate. The company then returns the principal along with the accrued interest at a later date. Similar to certificates of deposit offered by banks, these plans carry low risk and, as a result, offer modest returns. They differ from other guaranteed investment contracts (GICs) in that they involve a series of payments over time, rather than a one-time lump sum.
Insuranceopedia Explains Window Guaranteed Investment Contract
The “window” refers to the period during which the investor can make contributions and enjoy the guaranteed interest rate. Although the insurer guarantees the investment, the United States government does not back these contracts as it does with certificates of deposit, for example. If the insurer becomes insolvent, the investment could lose all of its value. Despite this risk, small businesses, new plan startups, and companies seeking a fixed and guaranteed rate find window GICs to be a viable option. Typically, they are used as retirement plans in defined contribution and 401(k) plans.
