Segregated Funds

Segregated Funds

what are segregated funds?

​Segregated (or seg) funds are an investment product sold by life insurance companies. They are individual insurance contracts that invest in one or more underlying assets, such as a mutual fund.

Unlike mutual funds, segregated funds provide a guarantee to protect part of the money you invest (75% to 100%). Even if the underlying fund loses money, you are guaranteed to get back some or all of your principal investment. But you have to hold your investment for a certain length of time (usually 10 years) to benefit from the guarantee. And you pay an additional fee for this insurance protection.

Warning: ​If you cash out before the maturity date, the guarantee won’t apply. You’ll get the current market value of your investment, less any fees. This may be more or less than what you originally invested.

Advantages of segregated funds Principal Guaranteed – Depending on the contract, 75% to 100% of your principal investment is guaranteed if you hold your fund for a certain length of time (usually 10 years). If the fund value rises, some segregated funds also let you “reset” the guaranteed amount to this higher value – but this will also reset the length of time.