Its legal nature
It is an individual variable insurance contract, issued by an insurer. You do not hold units of a fund: you hold a contract whose value tracks an underlying asset. That distinction explains everything else.
The guarantees
The contract generally guarantees a percentage of the amounts invested at maturity and at death, on the terms provided. Those guarantees are the product’s reason for being and the source of its higher fees.
Beneficiary designation
Because it is an insurance contract, a death benefit can be paid directly to the named beneficiary, outside the estate, with the effects that has on timelines and on certain settlement costs.
Creditor protection
In certain circumstances, and depending on the beneficiary designation used, an insurance contract may benefit from protection against creditors. This feature is of particular interest to the self-employed and to professionals.
The cost of the guarantee
A segregated fund’s fees exceed those of a comparable mutual fund, because they include the cost of the insurance. Paying for that guarantee is justified by a protection need, not by an expectation of higher returns.
Who can offer it
These contracts are distributed by representatives registered in insurance of persons. Their suitability to your situation must be assessed before subscription, as for any regulated product.
No rate, price, or recommendation on this page. Amounts and limits change: verify them with official sources before deciding.