That investment is a Segregated Fund. Here’s how it works:
- A Segregated Fund is an investment wrapped in a life insurance policy.
- Like mutual funds, a Segregated Fund pools money from investors and invests in a variety of individual securities
- If you leave your money invested in a Segregated Fund for the duration of the contract and do not make any withdrawals over that time, you’re usually guaranteed to receive whichever is greater of the investment’s current market value or its guaranteed minimum. More frequent guarantee periods may be available on some contracts
- In addition to the maturity guarantee, Segregate Funds offer a guaranteed death benefit. If you die before the contract matures, your heirs will receive the Segregated Fund’s market value or the guaranteed minimum if that is higher. The proceeds from a Segregated Fund can be held either inside or outside an RSP or RIF to avoid probate costs, since they are generally not considered part of a person’s estate. This can also speed-up payment to your heirs
- If you are a business owner, self-employed or a professional and require creditor protection, a Segregated Fund may help protect your assets from creditors. Claims made by former spouses and the Canada Revenue Agency are not protected regardless of who has been named as beneficiary
- If you are transitioning to retirement, a Segregated Fund may help preserve your nest egg