Yes, segregated funds offer contractual guarantees, regardless of market performance, because they are insurance contracts regulated under insurance laws, unlike other investments like mutual funds which fall under securities laws.

Segregated funds offer a suite of features derived directly from their insurance contract structure, providing benefits that appeal to specific investor needs, particularly around capital preservation, estate planning, and asset protection.

Here are some of the main points:

•Protecting Your Principal |Maturity & Death Benefit Guarantees: Segregated funds offer principal investment guarantees on the money you invest, typically applying at maturity (when the contract ends) or upon your death of the contract holder. These guarantees protect 75% or 100% of the money you put in (or higher with reset feature), even if the market goes down. To get these guarantees, you usually need to meet conditions like holding the investment for a specific period of time.

•Locking in Market Gains | The Advantage of Reset Options: A feature in many segregated fund contracts that allows the contract holder to lock in market gains, effectively raising the guaranteed amount for both the death benefit and maturity guarantee. This is usually done on an anniversary date or at other specified times.

•Shielding Your Assets | Potential Creditor Protection: In some situations, the money in your segregated fund contract may be protected if you face financial difficulties or bankruptcy. How much protection you get can depend on the specific contract and where you live.

•Streamlining Your Estate | Bypassing Probate and Ensuring Privacy: You can name a beneficiary directly on your segregated fund contract. This means that when you pass away, the death benefit can go straight to the person you named, often avoiding the probate process. This can make transferring the money quicker and potentially less costly compared to investments that have to go through your estate.

•Diversification and Investment Choice within Segregated Funds: Despite being insurance products, segregated fund contracts provide investors with access to a wide array of underlying investment options, mirroring the diversity often found in the mutual fund market. These options typically span various asset classes (equities, fixed income), geographic regions (Canadian, U.S., international), investment styles (growth, value, income, balanced), and market capitalizations. Some contracts may also offer access to specialty funds or fixed-income options earning pre-determined interest rates.

The assets held within the insurance contract are generally protected from creditors' claims against the contract holder, and the investments within the segregated funds offer protection from creditors.

This means that if an individual faces bankruptcy or financial difficulties, the assets held within a segregated fund contract may be protected from claims by creditors. The extent of this protection can vary depending on the specific contract and jurisdiction.

Yes, a significant advantage of segregated funds is the ability to name a beneficiary. This allows the death benefit to be paid directly to the named beneficiary, bypassing the probate process. This can lead to a quicker and potentially less expensive transfer of assets upon death compared to investments that are subject to probate.

Yes, like other investment products, segregated funds have fees. Segregated fund fees, including management fees and insurance costs for the guarantees, are typically incorporated into the fund's Management Expense Ratio (MER). Due to their additional features, such as guarantees and potential creditor protection, the fees are generally higher than those for comparable mutual funds.

The reset feature allows the contract holder to lock in market gains, increasing the guaranteed value of the investment for both the death benefit and maturity guarantee, potentially providing a higher payout in the future.

The death benefit guarantee ensures that, even if the market value of the fund declines, a certain percentage of the original investment (or a reset value) will be paid to the beneficiaries upon the contract holder's death.

Contractual guarantees are the promises within a segregated fund contract regarding minimum payouts at maturity or upon the death of the contract holder, regardless of the fund's investment performance.

No, segregated funds are not subject to the same level of regulation as bank deposits or GICs, which are insured by the Canada Deposit Insurance Corporation (CDIC). Segregated funds are overseen by provincial insurance regulators.

The guaranteed level of protection provided by Assuris for the Segregated Fund Guarantee benefit is $100,000 or 90%, whichever is higher.

The beneficiaries of a segregated fund contract are the individuals or entities designated by the contract holder to receive the death benefit.

No, the guarantees in a segregated fund contract are typically fixed at the time of issue, although the guaranteed amount can only increase through the utilization of the reset feature.

Glossary of Key Terms

Segregated Fund: An investment product offered by insurance companies that is similar to mutual funds but is structured as an insurance contract, providing certain guarantees.

Contractual Guarantees: Features within a segregated fund contract, such as death benefit guarantees and maturity guarantees, that promise a certain level of return or principal protection under specified conditions.

Death Benefit Guarantee: A guarantee that a certain percentage (often 75% or 100%) of the invested principal (or a higher guaranteed amount due to resets) will be paid to named beneficiaries upon the death of the contract holder, regardless of market performance.

Maturity Guarantee: A guarantee that a certain percentage (often 75% or 100%) of the invested principal (or a higher guaranteed amount due to resets) will be returned to the contract holder at a specified future date, regardless of market performance.

Reset: A feature in many segregated fund contracts that allows the contract holder to lock in market gains, effectively raising the guaranteed amount for both the death benefit and maturity guarantee. This is usually done on an anniversary date or at other specified times.

Beneficiary: The person or persons named in the segregated fund contract who will receive the death benefit upon the death of the contract holder.

Creditor Protection: A feature in some segregated fund contracts that can protect the funds from being seized by creditors, as the assets are held within an insurance contract and generally not considered part of the investor's estate for this purpose (subject to certain legal conditions).

Management Expense Ratio (MER): The annual fee charged by the fund manager to cover the costs of managing the segregated fund, including management fees, operating expenses, and taxes. This is typically higher than for comparable mutual funds due to the cost of the guarantees.

Assuris is a not-for-profit organization that protects Canadian policyholders if their life and health insurance company fails. It is an independent, industry-funded compensation organization. Every life and health insurance company authorized to sell segregated fund investments and insurance in Canada is required to become a member of Assuris. For the Segregated Fund Guarantee benefit under Investments / Savings, Assuris guarantees a level of protection of $100,000 or 90%, whichever is higher. You can use the Seg Funds Assuris protection calculator to find out how you are protected.