How segregated funds work
- You invest in one or more funds through an individual variable insurance contract issued by an insurance company
- Maturity guarantee: typically 75% to 100% of deposits, payable at a set maturity date, often 10 or 15 years after deposit, as defined in the contract
- Death benefit guarantee: typically 75% to 100% of deposits, paid to beneficiaries, with resets on some contracts
- Values above the guarantees fluctuate with the markets
Features people consider
- Named beneficiaries: proceeds may pass outside the estate, which can avoid probate fees and delays
- Potential creditor protection in certain circumstances, which depends on beneficiary designations and the facts at the time. This is not guaranteed in every case.
- Registered or non-registered: available in RRSP, RRIF, TFSA and non-registered contracts, depending on the insurer
Costs and risks
- Fees (MERs) are generally higher than comparable mutual funds because of the guarantees
- Withdrawals reduce guarantees, often proportionally
- Some purchase options carry redemption charges. I’ll explain any charge, in writing, before you invest.
- Past performance does not guarantee future results
Before recommending anything, I complete a know-your-client and suitability review covering your goals, time horizon and risk tolerance, and give you the Fund Facts for any fund we discuss. Segregated funds are not mutual funds, GICs or bank deposits, and they are not insured by CDIC.
Coverage descriptions are general. Your policy wording, limits and exclusions determine what is covered. Availability and premiums vary by insurer and by your circumstances.