What is Segregated Fund Contract
Segregated fund contracts, exclusively offered by life insurance companies, present a popular investment avenue akin to mutual funds. These contracts entail pooling funds into stocks, bonds, or other securities, resembling mutual funds, albeit with higher fees. The reason for the elevated fees lies in the additional benefits and guarantees inherent in life insurance contracts.
Advantages of segregated fund contracts:
Assurance: Safeguard the value of your premiums upon contract maturity and in the event of death. These guarantees typically range from 75% to 100% of your premiums, adjusted for any withdrawals. Some segregated fund contracts also extend income guarantees.
Beneficiaries: Designate a beneficiary to receive a death benefit from your registered or non-registered accounts. Upon your demise, your beneficiary receives the death benefit, equivalent to the contract value at death or the guaranteed amount, whichever is greater. This death benefit bypasses your estate and directly benefits your chosen beneficiary. Furthermore, you can dictate how your beneficiary receives the benefit, whether as a lump sum or in the form of a payout annuity.
Potential creditor protection: Segregated fund contracts may offer a shield against creditors, potentially safeguarding your funds from seizure.
Guaranteed income alternatives: Certain segregated fund contracts feature lifetime guaranteed income options, ensuring a steady income stream for the duration of your life.