- Brahma Swarup Varma, President, PRO-Financial Planners Ltd.

There are basically three modes of cash investments – in GICs and bonds, in mutual funds, or in stocks. Due to the market volatility risk Mutual funds and stocks, people are scared of putting their hard earned money into them. This is where segregated funds come in.

Segregated funds are investment programs developed and sold exclusively by life insurance companies. They offer the growth potential of mutual funds along with two guarantees – Maturity Guarantee of the invested capital, and Death Guarantee.

When you invest in a segregated fund, you are actually buying an insurance contract. The money from each contract is then invested in an investment portfolio similar to the mutual funds. You do not own or manage the units of the segregated funds. However, the investment returns of your segregated funds will closely resemble the performance of a similar mutual fund.

Under the Maturity Guarantee, you can select segregated funds with 75% or 100% investment guarantee, regardless of how markets perform. Following your 10-yr term to maturity or upon your death, any time, you or your beneficiaries will receive the guaranteed amount or the market value of your investment, whichever is greater.

Like mutual funds, you can buy and sell segregated funds at any time. However, if you sell prior to the maturity date, you will receive the market value, which may be less than your original investment.

Some segregated funds include a “reset” feature, which allows the investor to lock in investment gains and reset the minimum guaranteed amount at a higher level.


In addition to the death benefit that helps you preserve your investments for your beneficiaries, segregated funds can help you avoid costly delays that can affect the value of your investments as funds will flow directly to your beneficiaries, tax-free bypassing probate.


If you own a business, are self-employed or are the director or officer of a company, your savings can be at risk if creditors can claim your personal or business investments. However, as an insurance contract, segregated funds are out of reach to creditors if you name a spouse, child, parent or grandchild as beneficiary. The protection isn’t foolproof, but should be effective if you don’t try to use your segregated funds as an emergency asset shelter.