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GIC’S & GIA’S:
Not all guarantees are the same!
Guaranteed investments are ideal for prudent investors during all market conditions. An Insurance companies Guaranteed Investment Account (GIA) and a Bank’s Guaranteed Investment Certificate (GIC), both offer the following:
1. A guarantee of principle and a guaranteed rate of return for the duration of the term
2. Protection of up to $100,000 against financial losses of the issuing financial institution (bank deposits are covered under the Canada Deposit Insurance Corporation and life insurance cash values are covered under Assuris)
GUARANTEED INVESTMENT CERTIFICATES(GIC’s): are savings investments issued by banks, trust companies and credit unions. When you invest in a GIC, in effect, you loan the institution a set amount of money, which it then invests in securities or loans. For the use of your money, you are ensured of the return of your principal at maturity and interest over the term of the GIC.
To provide regular income over short and intermediate periods of time.
GICs are well suited for safety-conscious, income-oriented investors.
- Regular Income: GICs offer a fixed rate of return so you know exactly how much income you will receive each year until maturity.
- Safety: GICs with a term of five years or less are insured up to $100,000 by either the Canada Deposit Insurance Corporation (CDIC) or Credit Union Deposit Insurance Corporation (CUDIC).
- Non Redeemable: This investment is not redeemable prior to maturity. GICs cannot be sold prior to maturity. 30-day Cashable GICs are cashable 30 days after the date, 90-day Cashable GICs are cashable 90 days after the dated date and 120-day Cashable GICs are cashable 120 days after the dated date. Redemption’s are not same day settlement; funds may be available in three to five business days.
- Tax Status: Income from GICs is fully taxable unless held in a qualified retirement plan.
ARE ALL GUARANTEED INVESTMENTS CREATED EQUAL?… The Answer is NO!
HERE ARE THE MAIN DIFFERENCES!
GUARANTEED INVESTMENT ACCOUNTS (GIA) have all of the features and benefits of a GIC, plus the following advantages!
HIGHER INTEREST RATES: Insurance companies rates are typically higher and more competitive than bank deposit rates. Insurance companies also offer banding. This means that the larger the amount held in a guaranteed interest account, the higher the rate offered provided certain minimum thresholds are achieved.
REDEEMABLE: Many GIC’s are locked in for the duration of the term. Insurance companies GIA’s can be cashed in before maturity, subject to a market value adjustment.
BENEFICIARY DESIGNATION: A non-registered GIC account cannot have a beneficiary designation, but a non-registered GIA account can. This means the proceeds can go directly to a named beneficiary tax-free.
ESTATE PLANNING: At death, the proceeds from a GIC usually incur probate, legal and executor fees, not to mention the time it takes to settle the estate. GIA’s are an insurance product and do not have to pass through the estate. Your beneficiary may be paid directly and quickly, potentially avoiding estate-related fees.
PENSION INCOME TAX CREDIT: GIC interest income does not qualify for the Pension Income Tax Credit, but interest earned on a GIA does. This means that an investor that is 65 or older may claim the first $2,000 of interest on a non-registered account as eligible pension income.
CREDITOR PROTECTION: GIC’s, by themselves, cannot offer protection to the owner from his or her creditors. A GIA is an insurance product and, therefore, may provide creditor protection to the policy owner from his or her creditors subject certain conditions.
At F1RST CHO1CE Investment Solutions were passionate about sharing our knowledge, experience and unbiased opinions with families and individuals that are looking for a trusted advisor to help them with their Investment Planning options.
ANY QUESTIONS?…Contact a Licensed Investment Advisor today!