Short answer
A segregated fund is a savings contract issued by a life insurance company. It invests in a pool of assets like a fund, but adds guarantees on part of your deposits at maturity and on death, and lets you name a beneficiary. Before you look at one, run your family's number so savings and protection work together.
Run your number The family protection calculator shows how much your family would need and what is missing today. No-cost, no obligation.
How a segregated fund works
You deposit money into a contract with an insurance company. The value goes up and down with the assets in the fund. The contract sets out guarantees, usually a percentage of your deposits, paid at a maturity date or on death.
Why people choose them
- A named beneficiary can receive the money directly, which may keep it out of the estate.
- Guarantees set a floor on part of your deposits at maturity and on death.
- They can be held in an RRSP, TFSA or non-registered account.
What to weigh
Guarantees have a cost, so fees are often higher than similar funds without them. Read the Information Folder and Fund Facts, and ask how the guarantees, fees and reset options work.
Protection if an insurer fails
Assuris is the not-for-profit that protects Canadian policyholders if a member life insurance company fails. Its website explains the coverage for segregated funds.
Frequently asked questions
Who issues segregated funds?
Life insurance companies. They are insurance contracts, not bank products.
Is a segregated fund guaranteed?
Part of your deposits is guaranteed at maturity and on death, as set out in the contract. The value in between can go up or down.
Can a segregated fund avoid probate?
When a beneficiary is named, the money can usually go to them directly instead of through the estate. Ask your lawyer about your situation.
Can I hold a segregated fund in a TFSA or RRSP?
Yes. They can be held in registered and non-registered accounts.
Sources and further reading
This page is general education, not personal advice. Rules can change, so check the official sources above. In Ontario, life insurance quotes are prepared by a licensed life insurance agent.