Segregated funds are an investment solution only available through insurance companies. They help to grow and protect your hard earned money with the added security of principal guarantees. You can think of it as a combination of a mutual fund with an insurance policy. Money is invested in professionally managed and diversified funds with the growth potential similar to mutual funds. But segregated funds have additional insurance components that protect the original amount invested.

Segregated funds offer unique benefits that mutual funds do not, such as:

1. Maturity guarantee vs. death benefit guarantee

A maturity guarantee helps to protect your initial investment (at contract maturity), while a death benefit guarantee ensures that your named beneficiaries will recieve 75% or 100% of the amount that was invested (depending on the guarantee option chosen by you) in 15 years from your initial investment or at time of your death.

2. Potential protection from creditors 

Reduce estate-planning costs. After a person dies, there is a legal approval process required to validate a person’s will.This process is called probate, and can be a lengthy administrative hassle that incurs fees. Segregated funds are not subject to the probate process, meaning that funds go directly to the beneficiary, without any estate or probate fees.

3. Potential protection from creditors 

Potential protection from creditors. Segregated funds are considered an insurance contract so they may be protected under provincial law from seizure by creditors in the event you declare bankruptcy. This may be an important benefit for professionals, entrepreneurs and business owners who might be involved in an unexpected lawsuit or bankruptcy.

4. Reset the guaranteeed value of your investment 

If your investment has increased in value, you may have the option to reset the guaranteed value of your investment, which now protects the new “increased” amount. These guarantees and benefits, combined with the growth potential, what make Segregated funds better for some investors than Mutual Funds.