Guaranteed Investment Certificates (GICs) are considered lower-risk investments. That's because you are guaranteed to get back the amount you invest— the principal — when your GIC matures. Still, there are some risks with GICs.

Index or market-linked GICs don’t pay a fixed rate of interest. Instead, your return is based on the performance of a benchmark, like a stock market index. If the stock market does well and the index rises, your index GIC could do better than a fixed-rate GIC. If the index doesn’t do well, you may make less, or nothing at all. However, like any GIC, you won’t lose any of your principal.

Other things to consider

1. Because GICs are lower risk, they have a relatively low return compared to other investments. And they may not keep pace with inflation.
2. The interest you earn will be fully taxed.
3. You may pay a penalty if you cash in your GICs early.

Make sure your GICs are protected

Your GIC is insured if you bought it at:

• Any major Canadian bank. Banks are members of the Canada Deposit Insurance Corporation (CDIC).
• A credit union or caisses populaires. Similar insurance is available for deposits.

This means you will get your money back if the financial institution where you bought your GIC closes down or is unable to pay you when the GIC matures. Coverage depends on the value and type of GICs you hold. For example:

• CDIC insurance covers you for up to $100,000 in GICs at each financial institution.
• US dollar GICs and GICs with terms longer than 5 years are not insured.

The insurance is automatic. You don’t have to do anything, and you don’t have to pay anything extra, to get it.

3 tips to make sure your GICs are protected

To help you stay within the $100,000 limit per financial institution, you can:

1. Buy GICs at different financial institutions or their related companies. Example: a bank may have a mortgage company or trust company that sells GICs.
2. Put some of the GICs in your name and some in your spouse’s name.
3. Own GICs jointly with your spouse.