Segregated Funds
Segregated Funds
Market investing with insurance protections built in, including a guarantee on your deposits and a direct path to your beneficiaries.
What is a segregated fund?
A segregated fund is an investment held inside an insurance contract issued by a life insurance company. Your money is invested in funds that can rise and fall with the markets, similar to a mutual fund. Because it’s an insurance contract, it also comes with guarantees and estate features that a regular investment account doesn’t have.
The word “segregated” means the fund’s assets are kept separate from the insurance company’s general assets.
Why people choose them
What to weigh first
- Fees: fees are usually higher than for a comparable mutual fund, because you’re also paying for the guarantees. Higher guarantees generally cost more.
- Guarantee timing: the guarantee only applies at the contract’s maturity date or at death. If you withdraw earlier, you receive the current market value, which may be less than you put in.
- Withdrawals: taking money out generally reduces your guaranteed amount.
- Time horizon: maturity guarantees are built for long-term money, often with a term of 10 years or more. Check your own contract.
Segregated funds and mutual funds compared
| Segregated fund | Mutual fund | |
|---|---|---|
| What it is | Insurance contract | Securities investment |
| Deposit guarantee | 75% to 100% at maturity and death | None |
| Avoids probate | Generally yes, with a named beneficiary | Not usually in a non-registered account |
| Creditor protection | Possible, depending on the situation | Generally no, outside certain registered plans |
| Typical cost | Higher | Lower |
Who they can suit
- Investors nearing or in retirement who want some protection against a market downturn
- Business owners and self-employed professionals looking into creditor protection
- Anyone who wants assets to pass directly to family, without the delay and cost of probate
They’re often not the best fit if you’re mainly focused on keeping costs as low as possible and have a long time horizon, or if you may need the money before the contract matures.
Your rights in Ontario
Segregated funds are sold by licensed life insurance agents and regulated in Ontario by the Financial Services Regulatory Authority (FSRA). FSRA has banned deferred sales charges on new individual segregated fund contracts since June 1, 2023. Those were fees for withdrawing your own money early. Insurers must also begin sending more detailed annual statements in 2027, showing total costs and performance for 2026 onward.
Is a segregated fund right for you?
I’ll compare the options with you, including the fees, so you can decide with the full picture.
Any amount allocated to a segregated fund is invested at the risk of the contract owner and may increase or decrease in value. This page is general information, not personal financial, legal or tax advice. Guarantees, fees and features vary by insurer and contract; the contract and information folder set out the actual terms.
