Segregated Funds

What Is a Segregated Fund?

A segregated fund (“seg fund”) is an investment contract offered by a life insurance company.

It combines the growth potential of traditional investments (stocks, bonds, etc.) with insurance-style guarantees.

The assets are kept separate: they are segregated from the insurer’s general assets, meaning the risk associated with these investments is not mixed with the insurer’s other business activities.

Main Features and Guarantees

Maturity Guarantee

When the contract reaches maturity (15 years), you are guaranteed to receive either the market value of your invested funds or 75% / 100% of your original investment (depending on the guarantee you selected when purchasing the investment contract), whichever amount is higher.

Death Benefit Guarantee

If you pass away before the maturity date, your beneficiaries receive either the market value of your invested funds or 75% / 100% of your original investment (depending on the guarantee selected at purchase), whichever amount is higher.

Reset Option

Some contracts allow for resets: if the market value of the fund rises above a certain level, you can “lock in” this higher value, so the guaranteed amount increases. This helps protect gains against future market declines.

Guarantee Levels

You typically choose from different guarantee structures such as “75/75,” “75/100,” “100/100.”

• The first number represents the maturity guarantee percentage.

• The second represents the death-benefit guarantee percentage.

Benefits

Protection Against Losses / Risk Mitigation

Thanks to the guarantees, even if the markets crash, you are assured to get back at least 75% or 100% of your investment (as long as you hold the contract to maturity or pass away before maturity), depending on the guarantee chosen.

Estate Planning and Beneficiary Designation

The death benefit is usually paid directly to the named beneficiaries, bypassing probate.
This can allow for faster payment, greater privacy, and potentially lower administrative costs.

Creditor Protection

Because this is an insurance contract, there may be legal protection from creditors in certain circumstances (often valuable for business owners) — depending on the contract and jurisdiction.