A guaranteed interest annuity (GIA) is an insurance contract that provides a buyer with a fixed rate on their deposits.
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What is a GIA?
A guaranteed interest annuity (GIA) works similarly to a guaranteed investment certificate (GIC). It is a life insurance contract that provides a buyer with a fixed rate on their deposit for a set period of time. It’s sometimes called a guaranteed interest account, guaranteed interest contract or accumulation annuity.
How do you buy a GIA?
Consider following these steps before you invest in a GIA:
Decide how much to invest and for how long
Do you think you might need to redeem your GIA early? GIAs can be redeemed early, but the market value adjustment could reduce (or increase) the payout. This depends on how interest rates move after your purchase.
Some GIAs require a minimum deposit.
Shop around for interest rates
GIA rates are comparable to GIC rates, but they can fluctuate. Compare GIA rates online for the term you’ve chosen. Talk to the people who sell GIAs. Ask if you can get a better rate than the one posted. Rates may also depend on the amount of money you’re investing.
Choose an insurance agent or deposit broker
You can buy GIAs from advisors licensed to sell life insurance, as well as insurance company agents. This includes many advisors at full-service investment dealers and independent deposit brokers. You can find an independent deposit broker through the Registered Deposit Brokers Association (RDBA).
How do GIAs compare to GICs?
GIAs are different than GICs in a few key areas, including early redemption, naming a beneficiary, creditor protection, and bankruptcy protection.
| GIAs | GICs | |
| Early redemption | Can often be redeemed early with a market value adjustment | Normally locked in until maturity |
| Naming a beneficiary | Can name a beneficiary | GICs become part of estate assets |
| Creditor protection | Can be structured to avoid probate at death and avoid creditor claims | No creditor protection |
| Bankruptcy protection |
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If you’re over age 65, interest from a your non-registered GIA may qualify for pension income splitting and also for the pension income amount. That’s if you don’t already have enough pension or RRIF income to qualify.
Try our compound interest calculator to see how saving even small amounts of money can add up over time.
Summary
GIAs are life insurance contracts. They are similar to GICs. With GIAs, you can:
- Shop around to compare rates and ask a broker for the most favourable rate.
- Name a beneficiary for your GIA.
- Understand how market fluctuations can affect your GIA upon redemption.
