Investments

A segregated fund is an investment offered through an insurance company that works much like a mutual fund but carries built-in guarantees. Your money goes into a professionally managed pool of stocks and bonds, so its value rises and falls with the markets. The difference is the insurance wrapper: the contract guarantees that you or your beneficiaries receive back a set portion of your deposits at maturity or at death, even if the markets have dropped. That guarantee is the defining feature of these funds. Read the full guide →

Yes, segregated funds and guaranteed investment funds are two names for the same product. Segregated fund, seg fund, and guaranteed investment fund (GIF) all describe an insurance-based investment with built-in guarantees. The label depends on the insurer, as some brand them as GIFs while others call them segregated funds. The different names do not change the mechanics, which are the same.

A segregated fund and a mutual fund both invest your money in a managed portfolio, so the growth potential is similar, but a segregated fund adds insurance features. Those features include a guarantee on your principal at maturity and death, the ability to name a beneficiary so the money can bypass probate, and potential protection from creditors. The trade-off is cost, since a seg fund usually carries a higher fee than a comparable mutual fund. The decision comes down to whether those insurance features are worth the extra cost for your situation. Read the full guide →

Segregated funds tend to suit people who want market growth but prefer protection against market dips, so pre-retirees and retirees are a common fit. They are also popular with business owners and incorporated professionals who value the potential creditor protection, and with anyone focused on estate planning who wants money to pass quickly and privately to a beneficiary. For those who do not fit these profiles, a plain mutual fund or ETF might do the same job for less. A licensed advisor can help you weigh the options.

The maturity guarantee ensures that when your contract reaches its maturity date, you receive back at least a set percentage of what you put in, even if the market value has fallen below that. That percentage is commonly 75 percent or 100 percent of your deposits, though it varies by contract and insurer. The maturity date is usually about 10 years out. If your investment is worth more than the guaranteed floor at that point, you keep the higher market value.

The death benefit guarantee ensures that if you pass away while you hold the contract, your named beneficiaries receive at least a guaranteed percentage of your deposits, regardless of where the market sits. That percentage is commonly 75 percent to 100 percent, and many contracts set the death benefit at 100 percent while keeping the maturity guarantee at 75 percent. It is one of the main reasons people use seg funds for estate planning. The exact levels vary by contract, so it is worth confirming yours.

Those paired numbers describe the two guarantees on a segregated fund. The first number is the percentage of your deposits guaranteed at maturity, and the second is the percentage guaranteed at death. So 75/100 means 75 percent protected at maturity and 100 percent protected at death, while 100/100 protects the full amount at both. Higher guarantees give more protection but usually cost a bit more in fees, so it is a balance.

The day-to-day value of a segregated fund still moves with the market, so it can dip like any investment, but the guarantee sets a floor. As long as you hold to the maturity date or the death benefit applies, you are promised at least your guaranteed percentage of deposits back, commonly 75 percent to 100 percent, regardless of market performance. A crash right before maturity cannot wipe out your protected amount, though it can still affect anything above the floor. This floor is the core protection a seg fund provides.

A reset feature lets you lock in gains when your fund has grown. If your investment climbs above its original value, you can reset the guaranteed amount up to that higher level, so the new, larger number becomes your protected floor. The trade-off is that a reset usually restarts your maturity clock, often another 10 years from that point. Some contracts offer automatic resets while others let you trigger them yourself, and the rules vary by insurer.

Segregated funds and GICs are built for different comfort levels. A GIC is a fixed-rate deposit at a bank, so your return is guaranteed and predictable, but it will not grow beyond that set rate. A segregated fund is invested in the market, so it has real growth potential, with a guarantee that protects a large portion of your principal at maturity or death rather than a fixed interest rate. A GIC fits those who want zero surprises, while a seg fund suits those who want market upside with a safety floor. Read the full guide →

Yes, segregated funds can offer creditor protection, which is a significant draw for business owners and professionals. Because a seg fund is an insurance contract, naming a spouse, child, grandchild, or parent as beneficiary can shield the money from creditors under most provincial insurance rules. The protection is not absolute and it varies by province and by circumstances, so it is not a guaranteed shield. It is worth setting up with proper advice if creditor protection is one of your reasons for buying.

Yes, segregated funds can avoid probate when you name a beneficiary. Because a seg fund is an insurance contract, the money can pass directly to your named beneficiary instead of flowing through your estate, which means it can bypass probate. That usually makes the payout faster and more private, and it can save on probate fees, which vary by province. If you name your estate instead of a person, the money loses that advantage and goes through the normal estate process.

Yes, you can name more than one beneficiary on a segregated fund. You can name multiple beneficiaries and decide how the money is split between them, whether that is equal shares, specific percentages, or set dollar amounts. You can also name contingent beneficiaries, who receive the proceeds only if your primary beneficiaries have passed away first. It is a flexible way to direct exactly who gets what.

Yes, a segregated fund can be held inside the major registered accounts in Canada, including RRSPs, TFSAs, RRIFs, LIRAs, and LIFs. When you hold one inside a registered account, you receive the tax advantages of that account on top of the insurance guarantees. It is a common way to combine growth, tax sheltering, and estate benefits in one place.

Whether segregated fund returns are taxable depends on the account. Held inside a registered plan like an RRSP or TFSA, the normal tax rules of that account apply, so growth is sheltered. Held in a non-registered account, any capital gains, dividends, and interest the fund allocates to you are taxable in the year they are allocated, whether or not you actually withdrew the money. Because tax on investments gets specific quickly, it is wise to confirm your situation with a tax professional or advisor.

You can withdraw money from a segregated fund before maturity, as seg funds are not locked away. When you withdraw, you receive the current market value, which could be below what you put in if the markets have fallen, and your guarantee shrinks proportionately on the amount you pulled out. So an early withdrawal can reduce the protection you were paying for. Older contracts also sometimes carried deferred sales charges on early redemptions, so it is worth checking your specific contract before you withdraw.

Segregated funds cost more than mutual funds because you are paying for the insurance features, not just the investing. The management expense ratio, or MER, on a segregated fund commonly runs somewhere around 0.5 to 1.5 percentage points higher than a comparable mutual fund, and that extra cost covers the maturity guarantee, the death benefit guarantee, and the estate and creditor features. Over many years that fee gap can add up to a meaningful amount. The real question is whether the guarantees and estate benefits are worth that premium for you.

Segregated fund guarantees are backed by Assuris, the organization that protects Canadian policyholders if a life insurance company becomes insolvent. For segregated fund guarantees, Assuris coverage is commonly the higher of 90 percent of the guaranteed amount or 100,000 dollars. Every licensed life insurer in Canada must be an Assuris member, which is a layer of protection that ordinary mutual funds do not have. Coverage details can change, so treat these figures as a general guide.

The amount needed to open a segregated fund is often less than people assume, and it varies by insurer. Minimums commonly range from around 100 dollars at the low end to roughly 500 to 1,000 dollars at others, and some companies let you start with small monthly pre-authorized contributions instead of a lump sum. Because each insurer sets its own minimums and they can change, the best step is to check the specific fund. An advisor can point you to options that fit what you want to start with.

No, segregated funds are not guaranteed to make money. The guarantee protects a portion of your original deposits, commonly 75 percent to 100 percent, at maturity or death. It does not promise growth or a positive return, and the fund can still lose value along the way like any market investment. The guarantee acts as a safety floor under your principal, not a promise that you will come out ahead.

The simplest way to get started with a segregated fund is to talk it through with a licensed advisor, since seg funds involve choices like guarantee levels, beneficiary setup, and which account to hold them in. An advisor can compare options across insurers, explain the fees and guarantees in plain terms, and help you match a fund to your goals and comfort with risk. There is no cost to have that conversation. From there, getting set up is straightforward.