What is a seg fund?
Segregated funds offered by insurance companies are technically insurance policies known as variable annuity contracts. Seg funds differ from mutual funds in several ways, but mainly in that they offer a principal guarantee upon maturity and upon death, and the ability to creditor-proof the funds. The maturity guarantee usually states that, at the end of 10 years, a policyholder can cash in their policy and receive the greater of the net investment or the current value, whichever is higher. Death guarantees are similar except there is generally no minimum time frame required for the guarantee to apply it’s triggered upon death. Seg fund fees have two main components: management/operating expenses and the insurance premium to cover the capital protection mentioned above. The sum of the two equals the total seg fund fees. Just like any other type of insurance, the insurer sets aside a reserve out of the insurance premium in case they actually have to settle an investor’s policy upon deat
