Segregated Funds are a life insurance company’s version of a mutual fund. The term segregated is used because the assets of the investment pool are kept separate from the insurance company’s general assets.

Segregated funds are pools of investments assets managed by professional investment personnel. They fit in a wide variety of investment objectives by offering a wide variety of investment options, including Canadian and International equity funds, balanced, bond and money market funds. (See types of mutual funds for more information. Click here)

Segregated funds offer a death benefit guarantee, which is typically between 75% and 100% of net deposits, regardless of the current value at time of redemption. They also offer a minimum value at maturity guarantee, which is also typically 75% of net deposits. Maturity usually occurs 10 years from the original purchase date of the segregated fund.

The accumulated value of a segregated fund varies according to the performance of specific groups of securities that are purchased by the segregated fund managers. Although returns can fluctuate in the short term, in the longer term (10 years or more), segregated funds have historically delivered yields higher than GICs and deferred annuities.

Segregated funds can be purchased as a non-registered investment or as an registered investment (i.e. RRSP).

Probate fees and delays can by bypassed on the death of the investor if he or she has named a preferred beneficiary. Upon death, the account may be passed directly on to the named beneficiary.

By naming a preferred beneficiary, and the nature of the insurance policy, segregated funds also offer a degree of creditor protection making them ideal investment solutions for sole proprietors and small business owners.

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