Segregated Funds Ontario
Segregated Funds: Invest With Added Protection.
Investment funds offered through life insurance companies, with guarantees and estate planning features that regular mutual funds do not have.
What They Are
Investing With an Insurance Contract Behind It
Segregated funds combine the growth potential of investing with some of the protections of life insurance.
A segregated fund is an individual variable insurance contract issued by a life insurance company. Your deposits are invested in underlying funds, much like a mutual fund, and held separately (“segregated”) from the insurer’s general assets.
Because they are insurance contracts, segregated funds can include maturity and death benefit guarantees and let you name a beneficiary directly. They can be held in RRSPs, RRIFs, TFSAs and non-registered accounts.
Often considered by
- People saving for retirement who want some downside protection
- Retirees drawing income from their savings
- Business owners and self-employed professionals
- Anyone planning how assets pass to loved ones
How It Works
Key Features of Segregated Funds
Maturity guarantee
A set percentage of your deposits, usually 75% to 100% less withdrawals, is guaranteed when the contract matures, typically after at least 10 years.
Death benefit guarantee
If you pass away, your beneficiaries receive at least a guaranteed percentage of your deposits, subject to age limits and contract terms.
Estate planning features
With a named beneficiary, the death benefit is generally paid directly to them, which may help avoid probate fees and delays.
Potential creditor protection
When certain family members are named as beneficiaries, the contract may be protected from creditors in some situations. This is not guaranteed.
Guarantees, fees and features vary by insurer and contract. We will review the information folder and Fund Facts with you before you invest.
Questions
Segregated Fund FAQs
How are segregated funds different from mutual funds?
Both invest in a pool of securities, but segregated funds are insurance contracts. That allows for maturity and death benefit guarantees and naming a beneficiary. In exchange, their fees are usually higher than comparable mutual funds.
Are my returns guaranteed?
No. The market value of a segregated fund goes up and down with its investments. The guarantees only apply at maturity or on death, cover a set percentage of your deposits, and are reduced by any withdrawals.
What fees should I expect?
Segregated funds charge a management expense ratio (MER), which includes the cost of the guarantees. Higher guarantee levels usually cost more. Some contracts also have sales charge options. We will go through all costs with you before you invest.
What happens if the insurance company fails?
Assuris, a not-for-profit organization, protects Canadian policyholders, including segregated fund guarantees, up to certain limits if a member insurer fails. You can learn more at assuris.ca.
Are segregated funds right for me?
It depends on your goals, time horizon, comfort with risk and estate plans. For some people a lower-cost option may make more sense. We can compare options together.
Free Consultation
See Whether Segregated Funds Fit Your Plan.
A short conversation can help you understand how they work, what they cost and how they compare, with no pressure to decide.
Segregated fund contracts are issued by insurance companies. Any amount allocated to a segregated fund is invested at the risk of the contract holder and may increase or decrease in value. Guarantees apply at maturity or on death, subject to contract terms.