What is Guaranteed Investment Contract?

Legal Definition
A guaranteed investment contract (GIC) is a contract that guarantees repayment of principal and a fixed or floating interest rate for a predetermined period of time. Guaranteed investment contracts are typically issued by life insurance companies qualified for favorable tax status under the Internal Revenue Code (for example, 401(k) plans). A GIC is used primarily as a vehicle that yields a higher return than a savings account or United States Treasury securities and GICs are often used as investments for stable value funds. GICs are sometimes referred to as funding agreements, although this term is often reserved for contracts sold to non-qualified institutions.

It is not to be confused with a Guaranteed Investment Certificate, a product sold by Canadian banks, which also goes by the acronym of GIC.

Example: Funds obtained through a municipal bond issuance will generally take time to be drawn down. Depositing the bond proceeds in a GIC gives the bond issuer the liquidity of having the funds available while earning a higher rate of return than it would earn in a money market account. GICs are considered safe vehicles since most insurance companies offering them are rated in the AA to AAA range.

The term "GIC" is sometimes used in the context of "Guaranteed Investment Agreements" (GIAs).
-- Wikipedia
Legal Definition
A financial contract between an INSURER and an individual or PENSION PLAN (as BENEFICIARY) that provides the beneficiary with a specific return on CAPITAL invested over the life of the contract. The insurer bears the investment RISK associated with the securities in the GIC portfolio but is generally able to retain any excess it earns over the guaranteed return. See also NONPARTICIPATING GUARANTEED INVESTMENT CONTRACT, PARTICIPATING GUARANTEED INVESTMENT CONTRACT, SYNTHETIC GUARANTEED INVESTMENT CONTRACT.