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Segregated Finds
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What Is Segregated Fund?
When we invest money in any market-based investment vehicle like a stock market, mutual fund, etc. we know that we are taking a risk. The profit earned will depend upon the market condition and there is a risk of losing principle amount as well. One of the risk-free investment tools is Segregated Fund.
Segregated Fund also commonly known as Seg Fund are market-based investments that help you earn capital appreciation depending on market conditions. A Segregated Fund is a combination of products offering benefits of both investment tools and life insurance products. You can hold Segregated Fund in your RRSP or TFSA account.
Features Offered By Segregated Fund
- It offers benefits of investment options by capital appreciation and benefits of a life insurance policy.
- There is a maturity date for Seg Funds.
- Give a guarantee of protecting the amount you pay as a premium.
- You will receive a minimum of 75% or a maximum of 100% of your premium paid till the maturity period or death before reaching the maturity date.
- The appreciation in the capital will depend upon the market conditions.
- Seg funds are purchased from insurance companies and are contracts between an insurance provider and policy owners.
- The shares allocated in the Seg fund are in the name of the insurance company instead of the policyholder.
- Age cap for investing in Seg funds is till 90 years.
- The settlement process after the death of the policyholder is fast and hassle-free.
- You can invest using multiple investment options at the same time.
- You can put a clause in your policy and save money in your Segregated Fund from creditors if you get sued or become bankrupt.
- It is possible to buy Segregated Fund from the amount saved in your non-registered account.
- You can nominate a beneficiary who will get the amount in Segregated Fund after your demise directly without going through any legal process and in the way you decide.
- The amount received after your death could be a lump sum amount or annual disbursement of the amount decided by you.
Details About Segregated Fund
- Purchase Segregated Fund Policy from any reliable insurance broker.
- The premium you pay will be invested by the insurance company in different investment vehicles.
- Different investment vehicles that can be used for investment are stocks, debentures, debt funds or bonds.
- All the investment vehicles used are market-based and changes in market conditions will directly impact the value of your Segregated Fund.
- You can hold funds in Segregated Fund till they reached the maturity date.
- There is a Reset option available that enables you to lock a portion of your earned profits when the market is at its peak. This will reduce the risk further and in case the market falls it will not impact your amount in Seg Fund.
- You can evaluate your Segregated Fund risk profile with the help of different evaluating tools.
- Legal benefits are offered by Segregated Fund, especially for entrepreneurs. If an entrepreneur nominates a beneficiary who is not related to the estate then the nominee will receive the amount within 10 days of your death without undergoing lengthy formalities and heavy documentation process.
Will Segregated Fund Suit You?
Segregated Fund is for those who are not risk-takers and want to earn good returns. If you own an Estate and are willing to leave something to your family or loved ones then Segregated Fund is a good option for you.
Tips to Follow
- While investing in Segregated Fund, you must review the contract very carefully before signing it.
- There are several conditions that impact the amount you or your beneficiary will receive at the time of maturity or after your demise respectively.
- It is important that you understand the different situations and clauses carefully as they will impact the end amount.
- There are charges involved that have a substantial financial impact on your returns in the long term.
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