Segregated Funds
Mutual funds wrapped in a life insurance contract, with guarantees and higher fees.
Segregated funds (seg funds) are sold by life insurers (Manulife, Sun Life, Canada Life, Empire Life) and look like mutual funds, but they come with a maturity guarantee (75% or 100% of your contributions back if you hold for a set term, often 10 or 15 years) and a death benefit guarantee. They also bypass probate because they pay directly to a named beneficiary, and they offer some creditor protection because they are insurance contracts. The cost: MERs typically 0.5% to 1.5% higher than a comparable mutual fund. For most investors the guarantees rarely trigger and the extra MER is not worth it; for business owners and people worried about creditor claims, the protection can matter.
A 60-second lesson that puts this term in context, alongside the others, lives inside the Finlo app.