What is a segregated fund?

• Sold by licensed insurance representatives, not as securities.
• Guarantees commonly range from 75% to 100% of deposits at maturity or death, subject to contract terms.
• Named beneficiaries can receive proceeds directly, generally bypassing probate.
• Management fees are usually higher than comparable mutual funds because of the guarantees.
• Withdrawals before maturity generally reduce the guaranteed amounts proportionally.

A maturity guarantee applies at a contract maturity date, often 10 or 15 years from deposit. A death benefit guarantee applies if the annuitant dies before maturity. Both are stated as a percentage of the deposits, adjusted for withdrawals. Guarantees are contractual obligations of the insurer, not of a government agency.

Because the contract is insurance, naming a beneficiary generally allows proceeds to pass outside the estate, often faster and without probate fees. Creditor protection may be available in some circumstances, particularly where a beneficiary in a protected class is named, but it is fact-specific and cannot be assumed.

The guarantee has a cost, typically expressed in a higher management expense ratio. Whether the trade-off is worthwhile depends on time horizon, risk tolerance, estate objectives and whether the investor would otherwise stay invested through volatility.

• Guarantees apply at maturity or death, not to the market value on any given day.
• Resets, where available, may extend the maturity date.
• Creditor protection depends on provincial law, timing, intent and the beneficiary named.
• Compare total costs against the value of the features before deciding.

• Life and health insurance in Canada — industry resources — CLHIA
• Insurance and financial basics for consumers — Financial Consumer Agency of Canada
• Investor resources and registration checks — Canadian Securities Administrators