A segregated fund policy is very similar to a regular mutual fund as it allows for the diversified pooling of investments in a single fund structure. But unlike mutual funds, a segregated fund policy includes insurance guarantees that can protect much or in some cases all of your original investment.
Segregated Funds offer, maturity, and death benefit guarantees
Maturity Guarantee: You can typically choose between 75% or 100%, so even if the market drops, you’ll get most or all of your original investment back when your policy reaches its maturity date.
Death Benefit Guarantee: This means your named beneficiary (or beneficiaries) will receive either the market value of your investments or the guaranteed amount, whichever is higher at the time of your death.
Segregated Funds have other features as well such as resets to lock in your market gain and increase your guarantee amounts. Estate planning is easier as it allows your beneficiaries to receive your money without having those funds flow through your estate. That means the money in your policy won’t be reduced by taxes and the fees associated with settling an estate.
Segregated Funds offer creditor and liability protection which mutual funds do not offer. That means your assets within a segregated fund policy, whether registered or non-registered, may be protected from creditors, where a specific type of beneficiary – like a spouse or a child – has been named