- 75% to 100%Of deposits, less withdrawals, promised at maturity or on death, depending on the contractOSC, Segregated funds explained
- 10 yearsUsual minimum time to the maturity dateOSC, Segregated funds explained
- 2 business daysTo change your mind after the confirmationCCIR/CISRO guidance
- $100,000 or 90%Assuris protection if an insurer fails, whichever is higherAssuris
On this page
What is a segregated fund?
Segregated funds are investment funds sold by life insurance companies (OSC, Segregated funds explained, as of November 2026). The insurer keeps the fund’s investments separate, or “segregated”, from its own general assets (CLHIA, Key Facts About Segregated Fund Contracts).
You do not buy the fund’s stocks and bonds directly. You buy an individual variable insurance contract. The national guidance for insurers defines it as a contract of life insurance where what the insurer owes you rises and falls with the market value of the assets in the segregated fund (CCIR/CISRO Segregated Funds Guidance, November 2025, as of November 2026). In plain words: the insurer holds the investments, and you own the contract. You tell the insurer which funds to put your deposits in, and you name a beneficiary.
The Financial Services Regulatory Authority of Ontario (FSRA) notes that some life insurance products, such as segregated funds, are considered investments (FSRA, Life and health insurance, as of November 2026).
What the contract can promise: maturity and death benefits
A segregated fund contract usually has two promised minimums. The exact levels are written in the contract and its Information Folder.
Maturity benefit
On the maturity date, you receive at least 75% (up to 100%, depending on the contract) of your deposits, less withdrawals, or the market value if that is higher. The maturity date is typically at least 10 years after the contract starts, and in many contracts each new deposit has its own date.
Death benefit
If the person whose life the contract covers dies before maturity, the named beneficiary receives the greater of the market value or the promised percentage of the deposits made, less withdrawals.
Three rules matter in practice:
- Early withdrawals get market value. Money taken out before the maturity date is paid at its market value, less any fees, which can be more or less than you put in.
- Withdrawals shrink the promise. The national guidance requires insurers to say plainly that any withdrawal reduces the promised amounts.
- Some contracts have resets. A reset locks in a higher market value as the new promised amount. It usually pushes the maturity date further out, and it can carry an extra fee.
Sources: OSC, Segregated funds explained; CLHIA, Key Facts About Segregated Fund Contracts; CCIR/CISRO Segregated Funds Guidance, Appendix A. All as of November 2026.
The promise covers a minimum amount, not growth: insurers must state that they do not promise how the funds will perform.
Segregated fund vs mutual fund
Both pool money from many people and rise and fall with the markets. The national guidance treats them as similar investment vehicles and sets consumer protections for segregated funds with that in mind (CCIR/CISRO guidance).
| Feature | Segregated fund | Mutual fund |
|---|---|---|
| What you hold | An insurance contract with a life insurer | Units of an investment fund |
| Minimum amount promised | 75% to 100% of deposits, less withdrawals, at maturity or on death | None |
| Usual cost | Usually a higher MER, partly to pay for the insurance features | Usually a lower MER |
Sources: OSC, Segregated funds explained (MERs and the 75% to 100% range). As of November 2026.
Segregated funds fees: the MER and other charges
Segregated funds have fees for managing the fund and for the insurance protection built into the contract. Most are taken from the fund. The fee for the insurance protection can be part of the management fee or charged separately, and some contracts have fees you pay directly, for example for an income benefit. Before you apply, you receive the Information Folder and the Fund Facts, which list these fees.
- Management expense ratio (MER). The yearly cost of running the fund, shown as a percentage of the fund. The model wording in the national guidance explains that the MER includes the management fee, the fund’s operating expenses and the insurance cost of the promise. You do not pay it directly; it reduces your return.
- Fund expense ratio (FER). The MER plus the trading expense ratio, which covers the fund’s trading costs. The Fund Facts show it for each level of promise.
- Other charges. Depending on the contract: sales charges, switch fees, short-term trading fees and fees for optional features such as resets.
The OSC’s investor site notes that segregated funds usually have higher MERs than mutual funds, to cover the cost of the insurance features. A higher promise level, such as 100% instead of 75%, generally costs more. The exact figures are on each fund’s Fund Facts; this page does not quote MERs, because they differ by insurer, fund and option.
From the 2026 reporting year, an FSRA rule requires insurers to send Ontario contract holders enhanced annual statements showing total costs and performance, with the first statements due in 2027 (FSRA, Better information for segregated fund consumers, December 18, 2025, as of November 2026).
Beneficiaries, probate and creditor protection
Because a segregated fund is an insurance contract, you can name a beneficiary on it, with two effects people often ask about.
Probate and privacy
When a beneficiary other than your estate is named, the death benefit is paid directly to that person. It does not pass through the estate, so that amount avoids probate and executor costs and stays more private. The national guidance lists these as needs a contract can meet (estate preservation and privacy). If the estate is the beneficiary, the money goes through the estate.
Creditor protection
BC’s Insurance Act says that while a spouse, child, grandchild or parent of the insured person is the named beneficiary, the insurance money and the rights in the contract are exempt from seizure (section 65). The CLHIA brochure adds that an irrevocable beneficiary or a registered plan can also give protection. It is not automatic: courts have refused it where a contract was bought to shield assets from existing creditors.
Sources: Insurance Act (BC), RSBC 2012, c. 1, s. 65; CCIR/CISRO guidance, section 6.3.2; CLHIA, Key Facts About Segregated Fund Contracts. As of November 2026.
Ontario has its own insurance law, and rules can change, so a lawyer is the right person to confirm how creditor protection would work for you. Our estate planning page explains probate in Ontario and BC, and the life insurance page covers beneficiaries on insurance policies.
Accounts that can hold segregated funds
A segregated fund contract can be non-registered or registered, depending on what the insurer offers. The national guidance asks insurers to state the tax status of each contract, for example non-registered, RRSP, RRIF or TFSA.
- RRSP for retirement saving, with tax-deferred growth.
- RRIF for retirement income, with a yearly minimum withdrawal.
- LIF for locked-in pension money, with a yearly minimum and maximum.
- TFSA for savings where growth and withdrawals are generally not taxed.
- A non-registered contract, where gains are taxed under the usual rules.
The account type sets the tax rules; the segregated fund contract sets the promised amounts, fees and beneficiary rules inside it.
Who segregated funds may suit, and who they may not
The national guidance lists the needs a segregated fund contract can meet, and expects the person selling it to check them first.
May suit people who
- want a minimum amount promised at maturity or on death, and can leave the money invested until the maturity date;
- want money to pass directly to named beneficiaries, outside the estate and privately;
- may value potential creditor protection, for example some business owners and professionals;
- want a retirement income feature that some contracts offer.
May not suit people who
- may need the money within the next few years, since early withdrawals get market value;
- mostly want the lowest yearly cost and do not need the insurance features;
- already have beneficiaries and estate needs handled in other ways;
- are not comfortable with values that go up and down.
The OSC’s advice to investors is short: think about whether you need these features before you buy. A retirement planning conversation is often where that question comes up.
How to compare segregated fund contracts
Two documents do most of the work, and the national guidance says the person selling the contract is expected to give you both before you apply and explain them.
- Information Folder. Describes the contract: the promised amounts at maturity and on death, resets, fees, beneficiary rules and the plan types offered. It starts with a Key Facts summary.
- Fund Facts. A short document for each fund: what it invests in, its risk level, past performance, the MER and FER for each promise level, and other fees.
When you set two contracts side by side, look at the promised percentage at maturity and on death, how long until maturity, whether the promise applies per deposit or to the whole contract, the reset options and their cost, the fund expense ratios, and any charges for taking money out.
Right to change your mind. The guidance’s model wording says you can cancel in writing within two business days of the earlier of the date you received the confirmation or five business days after the insurer sent it. You get back the lesser of what you deposited or the value of the units, plus any sales charges or fees you paid. The same right applies to later deposits.
In BC, the Insurance Council of BC adopted the national guidance on December 10, 2025 (Insurance Council of BC notice and CCIR/CISRO guidance, as of November 2026). If a life insurer fails, Assuris protects segregated fund benefits up to $100,000 or 90% of the benefit amount, whichever is higher (as of November 2026). Segregated funds are not covered by CDIC.
Questions to ask before you apply
- What percentage of my deposits is promised at maturity, and what on death?
- When is the maturity date, and does each deposit have its own?
- What happens to the promised amount if I take money out?
- Is there a reset option, how often can I use it, and what does it cost?
- What is the MER and FER of each fund I am considering, at each promise level?
- Are there sales charges, switch fees or charges for early withdrawals?
- Which beneficiary designation fits what I want, and what does my province’s law say?
- Can this contract be held in my RRSP, RRIF, LIF or TFSA?
The Financial Consumer Agency of Canada notes that insurance companies have employees licensed to sell investment products such as segregated funds, and suggests asking any advisor which products they can sell (FCAC, Choosing a financial advisor, as of November 2026).
How AplusWealth works with segregated funds
Through insurers we work with, a licensed advisor can arrange a segregated fund contract, for clients in Ontario and British Columbia. AplusWealth does not sell mutual funds, stocks, ETFs or GICs. Investments are limited to segregated funds arranged through insurers, for clients in Ontario and British Columbia.
A first conversation usually covers what the money is for, when it may be needed, the beneficiaries you have in mind and the account it would sit in. You can find an advisor and request a call.
Segregated fund questions
What is a segregated fund in simple terms?
It is an investment fund offered by a life insurance company through an insurance contract. You own the contract, not the fund’s investments. The contract can promise a minimum amount at a maturity date or on death, and its value goes up and down with the markets until then.
What is the difference between a segregated fund and a mutual fund?
Both pool money into investments whose value goes up and down. A segregated fund is an insurance contract that can promise 75% to 100% of deposits, less withdrawals, at maturity or on death, and it can name a beneficiary. A mutual fund has no such promise. Segregated funds usually have a higher management expense ratio (MER) to pay for the insurance features.
Can I lose money in a segregated fund?
Yes. Money taken out before the maturity date is paid at market value, which can be lower than what you put in. Withdrawals also reduce the amount the contract promises. The insurer does not promise how the funds will perform.
Do segregated funds avoid probate?
Often, yes, when a beneficiary other than the estate is named. The death benefit is then paid directly to that person, outside the estate, so it does not pass through probate or the executor. If the estate is the beneficiary, the money goes through the estate.
Are segregated funds protected from creditors?
They can be, but it is not automatic. In BC, the Insurance Act exempts insurance money from seizure while a spouse, child, grandchild or parent is the named beneficiary. Courts have refused protection where a contract was bought to shield assets from existing creditors. A lawyer can confirm how the rules apply to you.
Can I hold segregated funds in an RRSP, RRIF or TFSA?
Yes, if the contract allows it. Insurers offer segregated fund contracts as non-registered plans and as registered plans such as an RRSP, RRIF, LIF or TFSA. The account’s tax rules still come from the CRA.
Can I change my mind after buying a segregated fund?
Yes, within a short window. Under the national guidance, you can cancel in writing within two business days of the earlier of receiving the confirmation or five business days after the insurer sent it. You get back the lesser of what you deposited or the current value, plus any sales charges or fees you paid.
What happens to a segregated fund if the insurer fails?
Assuris, the not-for-profit body that protects policyholders of its member life insurers, says it protects segregated fund benefits up to $100,000 or 90% of the benefit amount, whichever is higher. CDIC does not cover segregated funds.
Related pages
RRSP
How the deduction limit works and what an RRSP can hold.
RRIF
Turning an RRSP into income, and the yearly minimum.
LIF
Income from locked-in pension money.
Estate planning
Wills, beneficiaries and probate in Ontario and BC.
TFSA
Room, limits and what a TFSA can hold.
Sources
- Canadian Council of Insurance Regulators (CCIR) and Canadian Insurance Services Regulatory Organizations (CISRO), Segregated Funds Guidance, November 2025, with the Insurance Council of BC adoption notice of December 10, 2025: definition of the contract, disclosure documents, fee wording, right to cancel, customer needs. Checked as of November 14, 2026.
- FSRA, Better information for segregated fund consumers, December 18, 2025: Total Cost Reporting rule. Checked as of November 14, 2026.
- FSRA, Life and health insurance: segregated funds considered investments. Checked as of November 14, 2026.
- Ontario Securities Commission Investor Office, GetSmarterAboutMoney.ca, Segregated funds explained, last updated September 26, 2023: the 75% to 100% range, the usual 10-year period, resets, MERs. Checked as of November 14, 2026.
- Financial Consumer Agency of Canada, Choosing a financial advisor; the page lists 2025-10-20. Checked as of November 14, 2026.
- Assuris, How am I protected: protection of segregated fund benefits. Checked as of November 14, 2026.
- British Columbia, Insurance Act, RSBC 2012, c. 1, section 65 (insurance money exempt from seizure). Checked as of November 14, 2026.
- Canadian Life and Health Insurance Association (CLHIA), Key Facts About Segregated Fund Contracts, older industry brochure (copy hosted by an insurance distributor; CLHIA has removed its own copy while it is reviewed): separate assets, maturity period, probate, creditor protection conditions, who may sell. Its Assuris figures are out of date; the Assuris site above is current. Checked as of November 14, 2026.
Education only, not advice. This page explains how segregated fund contracts generally work in Canada. Each contract’s terms are set by the law and by the contract with the insurer that issues it. For advice on your own situation, talk with a licensed advisor, a lawyer or a tax professional.
