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Window Guaranteed Investment Contract

What is a Teller Guaranteed Investment Contract?

One-Stop Guaranteed Investment Contracts (WGICs) are a type of investment plan in which the investor makes a series of payments to an insurance company and is guaranteed a come back on investment. This kind of guaranteed investment contract (GIC) differs from other GICs in that the investor makes principal payments in installments over time, rather than in a single lump sum up front. Investors use window guaranteed investment contracts with 401(k) plans and other defined contribution pension plans.

Key points to remember

  • A Window Guaranteed Investment Contract (WGIC) promises guaranteed returns from a series of installment payments made during the contribution window.
  • Once the window is closed, no further contributions can be made.
  • The contract then matures for several years before returning principal and interest to investors.
  • Like all GICs, these products are considered low risk and also offer lower average returns.

Understanding Teller Guaranteed Investment Contracts

Over-the-counter guaranteed investment contracts look like certificates of deposit sold in banks, but may have a fixed or variable interest. Investors consider WGICs to be very safe investments. Because they carry little risk, they offer relatively low returns compared to other investment strategies. However, window GICs often have better rates than an investor would get through a bank, which is part of their popularity.

Small businesses find window GICs attractive, as do new start-up plans or other businesses that want a fixed, guaranteed rate throughout the year. The the window describes the period during which the investor can make payments and receive the guaranteed interest rate. Often, the issuer sets the window to one calendar year.

The payments made by the investor are paid into the general account of the insurance company. Investments in this account generally consist of conservative investments such as corporate bondscommercial mortgages and treasury securities.

From window to maturity

Once the window is closed and the investor can no longer make payments to the GIC, the invested funds remain in the contract for a period of time during which the contract matures. This period usually lasts between three and seven years. While the funds remain in the contract, they earn the predetermined rate of return so that the investor’s money grows. Once the contract has expired, the insurance company returns the capital and interest to the investor, who can choose to reinvest in another GC.

Although the “G” in GIC stands for guaranteed, window GICs are ultimately only guaranteed by the insurance company that sells them. They are not supported by the full faith and credit of the United States government. In this, they differ from certificates of deposit insured by the FDIC. If the insurance company becomes insolvent, the investment could lose all its value.

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