Are segregated funds protected from creditors?

• Protection depends on provincial insurance legislation and the facts of each case.
• Naming a protected-class beneficiary or an irrevocable beneficiary strengthens the position.
• Transfers made when insolvent or to avoid known creditors can be reversed by a court.
• Protection is not a substitute for proper business structuring or liability insurance.
• Legal advice is required before relying on creditor protection.

Provincial insurance acts provide that where certain beneficiaries are designated, the contract and its proceeds may be exempt from seizure by the contract owner's creditors. Quebec has its own civil-law framework with comparable concepts.

Courts can set aside a transfer made with the intent to hinder or defeat creditors, or a transfer made while insolvent. Timing matters: buying a contract after a claim has arisen is a common reason protection is challenged successfully.

Professionals and business owners sometimes use segregated funds as one element of a broader risk plan that also includes corporate structuring, adequate liability coverage and disciplined record keeping. No single tool provides complete protection.

• This is general information about how the law works, not a legal opinion.
• Bankruptcy law can override expectations in some cases.
• Fees for segregated funds are higher; protection alone may not justify the cost.

• Insurance regulation across Canadian provinces and territories — Canadian Council of Insurance Regulators
• Life and health insurance in Canada — industry resources — CLHIA
• Insurance and financial basics for consumers — Financial Consumer Agency of Canada