Segregated Funds Basics

Segregated funds are an investment that offers some built in guarantees. A guarantee of a death benefit equal to 100% or 75% of the investment amount is a main feature. If the owner passes away when the market value has dropped the beneficiaries are paid the guaranteed amount.

Segregated funds also offer a maturity guarantee at a certain age or a maturity date.

How does a Segregated Fund work?

Your investments are pooled with funds from other investors and together they are managed by the fund manager. The fund manager with his knowledge and experience will buy and sell stocks and bonds etc to get the best return for your money.

Benefits of investing in segregated funds

Segregated funds are very similar to mutual funds with some built in protection guarantees. These guarantees protect the value of your account in case of death or at maturity date. Some of the features are as listed below:

Death benefit guarantee: your funds are protected with a guarantee of 75- 100% of your investments (less withdrawls) in case of your death during a market crash.
Probate bypass: there are no probate fees because you can name a beneficiary with a segregated fund contract.
No withdrawal fees: there are no deferred sales charges (DSC Fees) in case of your death.
No delays in getting you funds: in case of your death your funds can be quickly paid directly to your beneficiaries without delays.
Privacy: your beneficiary designations are kept confidential and private.
Creditor protection: May be available in case of bankruptcy or lawsuit.

Fund options

Most major Insurance companies offer access to dozens of segregated funds from various fund manager like Franklin Templeton, Fidelity, Mackenzie funds etc.

Registration options

Segregated funds can be used for savings in a variety of ways as follows.:

Registered Retirement Savings Plan (RRSP)
Tax-Free Savings Account (TFSA)
Tax-Free Savings Account (TFSA)
Locked-In Retirement Account (LIRA)
Life income fund (LIF)
Non Registered investment plan.

Another way to protect your investments

It is important to understand the need to protect your investments. Let us say that you are investing your money for a purpose like retirement. What would happen if you suffer a major health emergency and you need to take a break from work? Chances are that you may have to dig into your RRSP or other investments to pay some bills. Critical illness insurance can be a big Savior in that situation. Critical illness insurance pays a lump sum benefit if you suffer one of the covered conditions and survive for at least 30 days. Click on the link below to learn more about critical illness insurance.