What is Guaranteed rate insurance?

Guaranteed rate insurance is becoming a popular choice for consumers. This type of insurance offers investors an opportunity to purchase an insurance policy where the company guarantees to pay the claim amount, no matter what. In short, if you invest in guaranteed rate insurance and then make a claim, the company will compensate you with 100% of your initial investment.

There are plenty of risk factors that come with investing in guaranteed insurance products and investments need to be carefully evaluated before they are purchased. However, they are often sold by so-called “brokers” who will tell you what you want to hear. They may also be sold by insurance agents, who may or may not be licensed. Guaranteed rate insurance products are often confused with guaranteed investment contracts (GICs).

What is Guaranteed rate insurance?

Guaranteed rate insurance is an investment product where you purchase a small insurance policy in exchange for an upfront payment. You receive guaranteed interest payments on your investment, and when you decide to make a claim, the company has to pay out 100% of your initial investment.

A Canadian guarantee rate insurance company called Royal Bond Corporation sold the policies. Royal Bond Corporation was the subject of a number of class-action lawsuits from Canadians who had purchased the products.

Types of their insurance

1. Life insurance

Life insurance of this type can be purchased as a policy or as an investment. In the case of investment, the premium paid amounts to the amount of your life insurance policy. In this case, you pay interest to the company for a period of time (usually 1 year), and then at the end of this period, you surrender your policy and receive 100% of the original amount that you paid.

2. Term insurance

Term insurance is sold with a set cash value that can either increase or decrease over time depending on either interest rates or inflation rates. The interest is paid to you for a certain period of time, and then at the end of this period, you are required to surrender your policy and receive 100% of the original payment that you made. In this kind of insurance, all claims are subject to a maximum benefit or maximum pay-out amount.

3. Mortgage protection insurance

In mortgage protection insurance, you purchase a mortgage protection policy that protects your home from default or foreclosure. You pay a monthly premium for the policy and when you make a claim on this product, you receive 100% of your initial payment amount.

4. Retirement insurance

Retirement insurance is purchased with money that belongs to you in the form of an IRA, 401K, or another retirement plan. This type of insurance is usually sold to individuals who are nearing the age of retirement and want to protect their assets. In some cases, it is recommended that you purchase a policy in order to receive a tax-free payout. When making claims on this type of policy, you always receive 100% of your initial investment. 

5. Income protection insurance

Income protection insurance is a type of life insurance coverage sold with an immediate lump sum payout. You make a claim on this product and receive the entire price you paid (upfront). This type of product offers the option to convert your policy into an annuity, which means that as long as you continue to pay premiums, your income will be guaranteed regardless of how long you live.

6. Critical illness insurance

Critical illness insurance provides you with guaranteed cash tax-free benefits in exchange for an upfront investment. The amount of benefit you receive after making a claim depends on the severity of your illness or injury.

7. Disability insurance

Disability insurance is designed to protect you from the financial loss that could result from a disability that prevents you from working by providing monthly income in exchange for an upfront investment.

8. Accident insurance

Accident insurance is designed to cover the cost of medical expenses and lost salary, in exchange for an upfront investment. Like disability insurance, when you make a claim on this product, you receive your entire investment back with no additional fees.

With policies like these, you may have already noticed that all claims are subject to maximum payout amounts. Therefore, when making a claim on guaranteed rate insurance products, you never receive more than your original investment amount (plus compound interest).

Guaranteed rate insurance

Benefits of this insurance

1. Insured returns

The interest that you receive from this type of insurance is usually higher than traditional investments, such as GICs. Because of this, you may be able to pay off debts, tackle larger projects, or perhaps even use the money for retirement purposes.

2. Increased premiums

Premiums can also be increase by securing a policy with a high maximum guarantee amount. In this case, you will receive your initial investment and compound interest plus the premium that was paid on top of your claim amount.

3. Tax advantages

There may be tax advantages to investing in guaranteed rate insurance policies depending on the type of plan that you purchase. In some cases, the interest earned can be exempt from taxes, and in other cases, capital gains may also be exempt when making claims (this varies widely depending on the jurisdiction).

4. Protection for your assets

Guaranteed rate insurance provides you with protection for your assets. After purchasing a policy, you will always receive 100% of the investment amount you paid in exchange for a monthly premium. This means that if your investment pays out at an annual rate of 10%. You will be guarantee to receive an annual interest payment on top of any other income that may be receive.

5. Tax evasion

Staying within the bounds of the law is also a benefit of purchasing guaranteed-rate insurance products. Because your investment may be exempt from taxes, you will have less income to declare when filing your taxes. Furthermore, by owning an investment that is tax differently than other investments, you will have fewer capital gains when making a claim on your policy.

Downsides to this insurance

1. Risks

Although guaranteed rate insurance is design as a product that is fairly risk-free, there are still risks involve with this kind of investment. For example, if you have a product that offers a maximum guarantee of 100%, you may have to wait until the end of your policy period (usually 1 year) to receive your investment amount. However, if you need access to funds before that time, you may not be able to get them. Furthermore, if your premiums are adjust upwards at any point in time after purchasing your policy. It is important to note that the rise in premium will not be include in your maximum guarantee amount.

2. Future regrets

When making a claim on your guaranteed rate life insurance policy, it is important to be aware of the fact that you will receive 100% of the investment amount that you paid upfront. Therefore, if your investments have not grown to their expected value by the time you decide to make a claim, you may end up feeling regretful about having made that decision.

3. Limited investment options

Because guaranteed rate insurance is often sell by smaller insurance companies. You may have limited options in terms of investment products and plan features. This means that you might not have access to the products or plan features that you desire.

4. Policy cancellation

If you decide to cancel your policy, the insurance company may not accept it. For example, if you have a minimum term of one year and decide that you no longer need the policy. The insurance company will likely not agree to a cancellation request. However, if you have a longer period for which you have paid premiums. You may be able to cancel your policy any time after the end of that term.


In general, there are several factors and benefits that come into play when considering guaranteed rate insurance products. In addition to this, most of these policies have high maximum guarantee amounts. Which makes them significantly more expensive than traditional investments. This means that for anyone looking for investment options that provide a better return on investment. A product like this is probably not the best option.

All in all, there are really a lot of benefits to purchasing this type of insurance. However, there are also significant risks involve with purchasing it.

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