Guraranteed Insured Investments
Guaranteed, Insured Investments provide absolute security of your money against market ups and downs. There are basically three modes of cash investments – GICs and bonds, mutual funds, or stocks. Due to Market Volatility of mutual funds and stocks people are scared of putting their hard earned money into them. This is where segregated funds come in.
They are guaranteed insured investment programs developed and sold exclusively by life insurance companies. They offer the growth potential of mutual funds, and are managed by the same top class fund managers. Segregated Funds, however, offer two exclusive guarantees – (1) Maturity Guarantee and (2) Death Guarantee.
When you invest in a segregated fund, you are actually buying a mutual fund supported by an insurance contract. In order to protect your capital, instead of being a direct investor in the portfolo of funds, you buy units of segregated funds owned and managed by the insurer. The company provides the unconditional guarantees of return of the principal. Thus the funds are truly Guaranteed Insured Investments.
Government of Canada requires that the money pooled in from the investors be segregated from the assets of the insurance company. The problems of the insurer cannot, compromise the safety and performance of the segregated funds. Just like the mutual funds, the pooled in money in seg funds is invested and managed by top ranking fund managers like TD, Aegon, CI, MacKenzie, Fidelity, Templeton, AIC etc. Majority of the same managers manage North America's top ranking mutual funds. That is why the investment returns of the segregated funds closely resemble the performance of similar mutual funds.
Unique Tax Advantage
In addition to the death benefit that helps you preserve your investments for your beneficiaries, segregated funds can help you avoid costly delays that can affect the value of your investments as funds will flow directly to your beneficiaries, tax-free bypassing probate.
If you own a business, are self-employed or are the director or officer of a company, your savings can be at risk if creditors can claim your personal or business investments. However, as an insurance contract, segregated funds are out of reach to creditors if you name a spouse, child, parent or grandchild as beneficiary. The protection isn’t foolproof, but should be effective if you don’t try to use your segregated funds as an emergency asset shelter.
Maturity And Death Guarantees
There are three levels, not affected by market volatility:
75% - 75%; 75%-100%; 100%-100%
For example, 75%-100% means, on maturity, 75% of the principal is guaranteed and on death it is 100%.
The investors selects the combination. Following the 10-yr term of maturity or upon any time death, the beneficiary or the investor receives the market value or the guaranteed amount whichever is higher.
Like mutual funds, as the investor, you can buy and sell units of segregated funds at any time. However, if you sell prior to the maturity date, you will receive the market value, which may be less, or more than your original investment.
Many segregated funds include a “reset” feature, which allows the investor to lock in investment gains and reset the minimum guaranteed amount at a higher level.
Only segregated funds offer guaranteed security of your principal
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