Learn something new every day
More Info... by email
A window contract is a type of guaranteed investment contract (GIC) which is purchased with a series of payments over a set period of time which is known as the window. This type of contract may also be known as a window guaranteed investment contract. Both people and institutions can purchase such contracts and they may be utilized in a variety of different ways for financial planning and investments. As with any type of investment, it is strongly recommended to research with care before making a purchase of a window contract.
Guaranteed investment contracts are sold by insurance companies. The company pays out a set interest rate over the time period covered by the contract and then repays the principle or allows people to reinvest at current interest rates. The “guarantee” is a reference to the fixed interest rate, and people should be aware that such contracts are not guaranteed against insolvency or financial failure. If an insurance company goes out of business, the window contract can become worthless.
The alternative to a window contract is a bullet contract. In a bullet contract, the principle is paid in a single payment. This can be an option for people or institutions with a lot of money, but for people with limited funds, a window contract can be preferable. This type of contract allows people to put a small amount of money into the contract every month, which may be more practical for people who do not have a lot of spare money to use for investments.
As people make deposits into a window contract, they should keep track of the money they have paid in and make sure that the insurance company records match their own. It is also advisable to keep track of the financial health of the company which issued the contract. If the company starts to experience financial instability, it may be a sign that there will be problems with the fulfillment of the contract. Creditors have different rankings when it comes to repayment after bankruptcy and holders of window contracts should be aware that there may be other creditors ahead of them who will use up the company's assets.
Investments should be diversified. Window contracts are relatively safe as long as the issuing company stays solvent, but they do not pay out a lot of money. People who invest solely in such contracts may not be able to save enough money to retire when they would like to. It is advisable to balance a portfolio of investments to take advantage of some riskier high paying investments while not endangering all investment funds by keeping them in high risk investments. Things like window contracts can make up the backbone of a portfolio because they guarantee steady performance.
One of our editors will review your suggestion and make changes if warranted. Note that depending on the number of suggestions we receive, this can take anywhere from a few hours to a few days. Thank you for helping to improve wiseGEEK!