A segregated fund is a professionally managed investment fund that offers growth potential similar to a mutual fund, however as it is maintained by a life insurance company, it offers additional benefits of estate and wealth protection.

Advantages

Financial guarantees. Segregated fund contracts have the advantage of insurance guarantees that state you will receive the greater of at least 75% of your original investment at the maturity date. Some segregated funds offer you the option of a 100% guarantee at maturity (usually 10 years from the date purchased). Following your term to maturity or upon your death, you or your beneficiaries will receive either the guaranteed amount, or the market value of your investment, whichever is greater.

The Reset feature. This feature allows you the opportunity to increase your guarantees, meaning you have the ability to lock in growth when the value of your investment increases. The guarantee reset feature simply locks in the guarantee amount at a new value, and Canada Revenue Agency does not consider the reset to be a deemed disposition, so no capital gains tax is payable.

Estate planning. In the event of your death, the proceeds of your investment can bypass probate and go directly to your beneficiaries, saving time and the expense of probate. However, your estate is taxed on any applicable gains.