Segregated funds, also known as guaranteed investment funds, are unique investment products offered by life insurance companies in Canada. They combine the growth potential of mutual funds with the security of insurance protection, making them an attractive option for investors seeking both investment growth and capital preservation.

Segregated Funds: Investment Growth with Security

• Investment and Insurance Blend: Segregated funds pool your investments, similar to mutual funds, but include insurance guarantees that can protect much or even all of your original investment.
• Maturity and Death Benefit Guarantees: These policies offer guarantees for your original investment, typically between 75% to 100%. This means that even if the market declines, you’ll receive most or all of your initial investment back at the policy’s maturity date. Additionally, segregated fund policies come with a death benefit guarantee, ensuring your named beneficiaries receive either the market value of your investments or the guaranteed amount, whichever is higher, upon your death.
• Potential Creditor Protection: Assets held within a segregated fund policy may be protected from creditors, especially when a specific type of beneficiary, such as a spouse or child, is named. This feature is particularly beneficial for business owners or professionals concerned about protecting their personal savings from professional liabilities.
• Estate Planning Advantages: By naming a beneficiary in your segregated fund policy, the proceeds can bypass probate, allowing for a more efficient transfer of assets to your heirs and potentially reducing estate fees.

Considerations:

• Fees: Due to the added insurance features, segregated funds often have higher management expense ratios (MERs) compared to mutual funds. It’s essential to weigh these costs against the benefits of the guarantees provided.
• Investment Horizon: To benefit from the maturity guarantees, investments in segregated funds typically need to be held for a specific period, usually around 10 years. Withdrawing funds before this maturity date may result in penalties and forfeiture of the guarantees.

At Studio Financial, we offer a range of segregated fund investments tailored to meet your unique financial goals and risk tolerance. Our expert advisors are here to help you navigate these options, ensuring you select the best solution for your investment and estate planning needs.