What is a segregated fund contract?

Segregated fund contracts are a popular investment option, available only from life insurance companies. Similar to mutual funds, segregated funds are large pools of money invested in stocks, bonds or other securities. These contracts have higher fees than mutual funds because they also offer guarantees and some of the additional benefits of a life insurance contract.

Benefits of segregated fund contracts

1. Guarantees. Protect the value of the premiums 

 you paid on the contract maturity date and on death. The guarantees are 75% to 100% of your premiums (reduced for any withdrawals). Some segregated fund contracts also offer income guarantees.

2. Beneficiaries. You can name a beneficiary to receive a death benefit from your registered or non-registered accounts. Your beneficiary will receive the death benefit when you die. The death benefit is the contract value at death, or the guaranteed amount, whichever is higher. The death benefit 

 bypasses your estate and goes directly to them. You can also control how your beneficiary gets the benefit: as a lump sum or in the form of a payout annuity.

3. Potential creditor protection. This means that creditors may not be able to take the funds you have in your segregated fund contract.

4. Guaranteed income options. Some segregated fund contracts offer lifetime guaranteed income. This can help provide you with a guaranteed income for life.