An insurance contract holding investment funds
When you invest in a segregated fund, you own an individual variable insurance contract issued by an insurer. The underlying assets are held separately (“segregated”) from the insurer’s general assets.
The guarantees
- Maturity guarantee: typically 75% to 100% of deposits after a set period, often 10 or 15 years
- Death benefit guarantee: typically 75% to 100% of deposits paid to beneficiaries
- Withdrawals usually reduce guarantees, and the exact rules depend on the contract
Other features
- With a named beneficiary, proceeds can pass outside your estate, avoiding probate fees and delays
- Potential creditor protection in certain circumstances. This depends on beneficiary designations and facts at the time and is not guaranteed.
The trade-offs
- Higher fees than comparable mutual funds, because you’re paying for the guarantees
- Market values fluctuate, so only the contract guarantees are guaranteed
- Some purchase options have redemption charges
Segregated funds are not mutual funds, GICs or bank deposits, and are not insured by CDIC. Before any recommendation, I complete a suitability review and provide the Fund Facts document. Consider getting tax advice for your specific situation.
Learn more on my segregated funds page.
This article is general information, not advice for your specific situation. Policy wording and insurer rules determine coverage.