Segregated Funds
A segregated fund is a variable insurance contract with a life insurance company. The investor places their capital on deposit with the insurance company which in turn invests in units of one or more of the “family” of segregated (separate) funds offered by the insurer.
Many investors choose segregated fund policies because, although they are market investments, segregated fund policies offer a variety of benefits:
Guarantees
There is a 75% mandatory maturity and death benefit guarantee which offers a “safety net”. Many investors are willing to pay a bit more in administrative fees and expenses for a security blanket. Some segregated funds may offer a full 100% guarantee at maturity or death.Potential Creditor Protection
Because segregated fund policies are regulated by the Uniform Life Insurance Acts of the provinces, the interests of named beneficiaries may be protected from creditors, even if the policyholder should declare bankruptcy.Estate Planning
Because proceeds of a segregated fund policy can be paid directly to a named beneficiary in the event of the death of the annuitant, they bypass the deceased’s estate and, consequently, are not exposed to probate fees, executor’s and lawyer’s fees and delays in the administration of the policyholder’s estate.