Segregated funds, annuities, and GIAs
In addition to traditional life insurance and living benefits products, there are also several types of products that combine the benefits of life insurance with an investment component.
Choose from the following links for a brief explanation of each product:
Like mutual funds, segregated funds are professionally managed and invested in a portfolio of securities. In fact, many segregated funds invest in brand-name mutual funds. Unlike mutual funds, segregated funds are insurance contracts that offer additional benefits such as principle investment guarantees.
The primary purpose of segregated funds is for estate planning; not only will insurers guarantee between 75% and 100% of your initial deposit at the time of your death, but the greater of your investment value or guarantee will flow directly to your named beneficiaries, without having to pass through your estate. As well, the same guarantee standards apply if you hold on to the contract until maturity (usually 10 years from the date of your deposit).
The purpose of an annuity is to provide you with a steady, guaranteed stream of income. For many older investors who want to ensure they have a guaranteed income, an annuity offers simplicity and a guarantee. In return for a lump sum, the insurer will deliver a regular income for your entire lifetime. That eliminates the need to manage the investment, continuously looking for the highest rates and worrying about what prevailing rates will be at maturity. If you wish to have the initial capital returned at death, the annuity can be used in conjunction with a life insurance contract. This strategy often delivers a greater net yield than traditional fixed-income products.
These operate just like Guaranteed Investment Certificates (GICs), only with the same estate planning benefits of segregated funds. Interest is earned and either taken as income or reinvested to compound; at death, the initial capital is delivered to your named beneficiary, thereby avoiding the costs and delays associated with probating your estate.