Window Guaranteed Investment Contract

DEFINITION of 'Window Guaranteed Investment Contract '

A type of investment plan where a series of payments are made to an insurance company, and the principal and interest rate are guaranteed by the insurance company to which payments are made.

Window guaranteed investment contracts are similar to certificates of deposit that are sold at banks. They are considered to be a very safe investment; however, because they involve little risk, they offer only small returns. Window guaranteed investment contracts, known as window GICs, differ from other GICs because they are bought with a series of payments over time instead of a lump sum.

BREAKING DOWN 'Window Guaranteed Investment Contract '

A window guaranteed investment contract is typically intended for 401(k) plans and defined contributions plans. A window GIC is also attractive to smaller businesses, new plan start-ups or companies that want a fixed and guaranteed rate throughout the year. The window is the period of time during which the company can make payments and receive the guaranteed interest rate. It should be noted that even though window GICs seem to be guaranteed, they are backed only by the insurance company that sells them, and not backed by the full faith and credit of the United States government like certificates of deposit are through the FDIC program. If the insurance company becomes insolvent, the investment could lose all of its value.