Segregated Funds
Segregated Funds, known colloquially as "Seg Funds," are a type of pooled investment similar to Mutual Funds. However, Segregated Funds differ from Mutual Funds by being issued by an Insurance Company and having an insurance element, which guarantees the return of principal - or a part of it (can be 75%) - on death or maturity. While on the surface Segregated Funds appear almost identical to Mutual Funds, the taxation issues pertaining to them are noticeably different.
What Is a Segregated Fund?
Segregated fund policies are insurance products with investment features.
- You pay premiums to an insurance policy, and allocate them to segregated fund investment options selected by you and your advisor.
- The premiums in these segregated funds are then invested by the investment manager in stocks, bonds or other assets, depending on the fund's investment objectives.
- And because they are available through an insurance policy, you can take advantage of unique benefits to bring more certainty and flexibility to your financial plan for your family and business.
Benefits of Segregated Fund Policies
Put the benefits of segregated fund policies to work for you.
Maturity guarantees
Segregated fund policies provide guarantees of either 75% or 100% of the premiums paid (less a proportional amount of redemptions), depending on the product selected. These guarantees allow you to plan more effectively for life events such as your retirement.
Death benefit guarantees
Segregated fund policies provide a principal guarantee in the event of death. This death benefit guarantee is usually either 75% or 100% of the premiums paid (or policy value if you’ve locked in market gains with policy resets) less a proportional amount of redemptions, depending on the product selected.
Potential protection from creditors
Laws may protect a segregated fund policy in the event of bankruptcy or other action by creditors. It’s important to note that creditor protection may depend on court decisions concerning such laws, which can be subject to change and can vary for each province. This protection cannot be guaranteed.
Speedy estate settlement
Segregated fund policies can help speed up estate settlement with protection for you and your family. If you name a beneficiary, the death benefit isn’t subject to the delays and expenses of the probate process. For non-registered policies (where the beneficiary is not the estate), several estate planning options are available to help organize future income payments for your beneficiary, in addition to the traditional option of a lump-sum payout.
