Skip Ribbon Commands
Skip to main content
Print Print
Text Size A A A

Segregated funds explained

Segregated funds combine the growth potential of investment funds with insurance protection.

​Segregated (or seg) funds are an investment product sold by life insurance companies. They are individual insurance contracts that invest in one or more underlying assets, such as a mutual fund.

Unlike mutual funds, segregated funds provide a guarantee to protect part of the money you invest (75% to 100%). Even if the underlying fund loses money, you are guaranteed to get back some or all of your principal investment. But you have to hold your investment for a certain length of time (usually 10 years) to benefit from the guarantee. And you pay an additional fee for this insurance protection.


​If you cash out before the maturity date, the guarantee won’t apply. You’ll get the current market value of your investment, less any fees. This may be more or less than what you originally invested.

3 advantages of segregated funds

  2. Guaranteed death benefit – Depending on the contract, your beneficiaries will receive 75% to 100% of your contributions tax free when you die. This amount is not subject to probate fees if your beneficiaries are named in the contract.
  3. Potential creditor protection – This is a key feature for business owners in particular.

3 disadvantages of segregated funds


Retail versus group retirement plan segregated funds



​You will pay higher fees for a retail segregated fund because of the insurance protection it provides. Carefully consider your need for these features before you buy.

 Related resources