Segregated Funds

Segregated Funds Definition

Segregated funds are very similar to mutual funds. They both offer the investor the ability to invest in the marketplace while using the expertise of professional money managers. In addition, segregated funds, like mutual funds, offer the investor the option to invest in different asset classes, and fund types.

However, the major difference between the two investments is a segregated fund is actually an insurance contract. Within the contract the segregated fund allows the investor to participate in the market, while still receiving the added benefit of having insurance to cover the risk. This is not to say that there are no risks associated with segregated funds, however, there are guarantees and features built into segregated funds that allow investors to invest with a higher degree of safety.

What do Segregated Fund Offer?

Features and Benefits of Segregated Funds

Death Benefit Guarantee
Maturity Guarantee
Ability To Bypass Probate
Creditor Protection
Assuris Protection

Death Benefit Guarantee - the death benefit guarantee protects a certain amount of the investment in the case of death. Most insurance companies offer a death benefit between 75% and 100% of the principal invested. The percentages vary depending on the company and the age of the individual. However, there are companies that do offer a 100% death benefit for individuals 80 years old, 90 years old and some with no age restriction at all.

Maturity Guarantee - The maturity guarantee is usually 10 years or longer from the original date of deposit and ranges from 75% – 100% of principal. This guarantee provides the investor with the comfort of knowing that no matter what happens in the market, their principal is protected.

Ability to Bypass Probate - Since segregated funds are insurance contracts, in the event of death the proceeds would bypass probate and estate fees and be sent directly to the named beneficiaries in a timely and efficient manner. A benefit mutual funds can not provide.

Creditor Protection - Segregated funds may be creditor proof. If the named beneficiary is a spouse, parent, child, or grandchild, and the investment was made in good faith, the funds may be protected from creditors even in the case of bankruptcy. This feature is especially beneficial to business owners and professionals.

Assuris Protection - Assuris is a not for profit organization that protects Canadian policyholders in the event that their life insurance company should fail. To learn more about Assuris and how it relates to segregated funds please go to www.assuris.ca

Due to the added benefits associated with Segregated Funds, they have become a popular choice for many investors. If you would like to learn more about Segregated Funds and how they would enhance your financial portfolio, please contact us.