At MoneyValue, our goal is to help you understand and make informed choices on the numerous solutions available to you. One important solution for investments is Segregated Funds or Seg Funds.
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.
Advantages of segregated funds
Principal guaranteed – Depending on the contract, 75% to 100% of your principal investment is guaranteed if you hold your fund for a certain length of time (usually 10 years). If the fund value rises, some segregated funds also let you “reset” the guaranteed amount to this higher value – but this will also reset the length of time that you must hold the fund (usually 10 years from date of reset).
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.
Potential creditor protection – This is a key feature for business owners in particular.
Seg Funds are a very important solution for financial planning and could enhance, diversify your portfolio and importantly, bring peace of mind with it's guarantees.
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