(MONEY Magazine) – The answer: maybe not as solid as you think. So don't be lulled by having a guaranteed investment contract -- that wonderful-sounding name for a place to put money for retirement. Indeed, GICs, as they are called, now attract 62% of new contributions to the company- sponsored 401(k) savings plans that offer them, according to Hewitt Associates, the Lincolnshire, Ill. employee-benefits consulting firm. If you work for any of the two-thirds of companies that offer GICs as part of their 401(k) plans, it's key that you understand the product's ins and outs. On the face of it, a GIC looks a lot like a bank CD -- investors get a fixed yield for one to five years (recently 7.6% to 8.4% vs. about 8% for one- and five-year CDs) and the promise that their principal will not lose value. But while federal deposit insurance backs most CDs, the guarantee behind a GIC is only as solid as the life insurance company issuing the contract. As Weston Hicks, an analyst with Moody's Investors Service in New York City, points out, GICs ''are nothing more than the unsecured credit of insurance companies.'' None of the 61 insurers that offer the contracts have defaulted on their GIC obligations in the 17 years that the contracts have been available to employees, and it's unlikely that any will in the next year or two. But the risk of calamity among the $150 billion in outstanding GICs is growing, because more and more insurers have packed their own investment portfolios with risky mortgages and as much as 45% in junk bonds. Cautions Hicks: ''The quality of most life insurance companies' assets has dramatically deteriorated during the past two years.'' Generally, company plans buy several GICs from one or more insurers. What would happen to your contributions and earnings if an insurance company defaulted on its contracts? That may depend on where the insurance company is based. If it operates out of one of the 44 states that maintain so-called guarantee funds, you might get back as much of your money as the fund could afford -- perhaps all of your principal but less interest than the insurer had promised. But it's possible that some state funds would not cover GICs. In that case, or if the insurance company that issued your GIC operates out of Alabama, California, Colorado, Louisiana, New Jersey, Washington, D.C. or Wyoming -- none of which maintain guarantee funds -- you could end up losing your whole account. You can better assess your GIC risk by asking your employee-benefits counselor these two questions: -- How is the GIC issuer rated for claims-paying ability? The safest GIC issuers get ratings of AA or better from Standard & Poor's or Moody's. S&P rates one company, Union Labor Life, BBB -- comparable to the lowest credit rating on an investment-grade bond -- and six are unrated by either service. -- What is the average maturity of the GIC portfolio? Ideally, it will be two or three years at most. If your 401(k) plan buys mostly GICs maturing in five years or longer, there is a greater risk that the issuer will stumble while in possession of your money.