Segregated FundsSegregated Funds are investment funds managed and/or distributed by insurance companies. They are similar to mutual funds but offer some distinct benefits. The advantages of segregated funds include:
- A 75% to 100% return of original investment guarantee at maturity or death. This can be very important especially as the fund approaches maturity. As an example lets say a 55 year old started a plan with a 10-year maturity. At age 64 he deposits an additional sum of money. At age 65 he would be assured of getting his guaranteed principal back regardless of how the market performed.
- Potential creditor protection. Contributions to a non-registered investment with an insurance company are generally "creditor proof" if there is a regular pattern of depositing. This is not the case with other mutual funds.
- No probate fees. One can name a beneficiary and have proceeds paid directly, thus bypassing the will. Since the investment is held in segregation, funds owned by the policyowner cannot be seized by creditors (i.e. if the client owns a business or corporation, their investments in Segregated Funds will be immune to creditors) should financial tragedy strike.
Read this article on Segregated Funds and Taxation.
These are significant advantages that are not available in mutual funds because insurance companies generally do not charge a small extra fee for these advantages. Therefore, they represent additional value for one's investment dollar, especially for business owners and professionals.
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