Guarantees on Segregated Funds

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Product

A segregated fund is an investment fund that accumulates value by investing in securities such as stocks and bonds. Guarantees are provided on individual segregated funds.

The Guarantees

Guarantees that may be offered on an individual segregated fund policy are:

  • Guaranteed amount at death
  • Guaranteed amount at a specified maturity date
  • Guaranteed withdrawal amounts
  • Guaranteed income benefit

Guarantees at Death and Maturity

The death and maturity guarantees ensure that you will retain a minimum amount from your investment regardless of market performance. Typically, the guarantee on an individual segregated fund policy is 75% or 100% of what you invested.

Assuris Protection

If your life insurance company fails, the value of your fund will not be impacted. Assuris will seek to transfer the fund and your guarantees to a solvent company.

Assuris guarantees that you will retain at least 85% of the guaranteed amount on your segregated fund policy. For policies that have a guaranteed amount of $60,000 or less, you will retain 100% of your guarantee.

Example 1:

  • You invested $100,000 in a segregated fund
  • The guarantee on the segregated fund is 75% at death or maturity

Guarantee on your segregated fund

$75,000

($100,000 × 75%)
Guaranteed amount at
death or maturity

In calculating your Assuris protection, you will retain up to $60,000 or 85% of your segregated fund guarantee, whichever is higher.

Since the guaranteed amount is more than $60,000, the 85% is applied to the guarantee on your segregated fund.

$63,750
($75,000 × 85%)
Adjusted guarantee amount

Example 2:

  • You invested $50,000 in a segregated fund
  • The guarantee on the segregated fund is 75% at death or maturity

Guarantee on your segregated fund

$37,500

($50,000 × 75%)
Guaranteed amount at
death or maturity

In calculating your Assuris protection, you will retain up to $60,000 or 85% of your segregated fund guarantee, whichever is higher.

Since the guaranteed amount is less than $60,000, the guarantee on your segregated fund is fully protected.

$37,500
Adjusted guarantee
amount

Example 3:

  • You invested $150,000 in a segregated fund
  • The guarantee on the segregated fund is 100% at death or maturity

Guarantee on your segregated fund

$150,000

Guaranteed amount at
death or maturity

In calculating your Assuris protection, you will retain up to $60,000 or 85% of your segregated fund guarantee, whichever is higher.

Since the guaranteed amount is more than $60,000, the 85% is applied to the guarantee on your segregated fund.

$127,500
($150,000 × 85%)
Adjusted guarantee amount

Guaranteed Minimum Withdrawal Benefit

The Benefit

Your Guaranteed Minimum Withdrawal Benefit (GMWB) is an option available in some segregated fund policies. The policy has two phases:

  • A savings phase where there is a guaranteed withdrawal balance
    • The guaranteed withdrawal balance provides a guaranteed rate of growth in the savings phase and;
  • A payout phase where there is a guaranteed income benefit
    • The guaranteed income benefit provides an annual income for a specified term or for life, even if the fund becomes depleted due to poor market performance.

At the time of failure of a life insurance company, your policy will either be in:

  • The saving phase
    • If no withdrawals have been made by the policyholder in the last 12 months
      or
  • The payout phase
    • If a withdrawal was made by the policyholder in the last 12 months

Assuris Protection

If your life insurance company fails, the value of your fund will not be impacted. Assuris will seek to transfer the fund and your guarantees to a solvent company.

  • In the saving phase: Assuris guarantees that you will retain at least 85% of your promised guaranteed withdrawal balance. For policies that have a guaranteed withdrawal balance of $60,000 or less, you will retain 100% of your benefit.
  • In the payout phase: Assuris guarantees that you will retain at least 85% of your promised guaranteed income benefit. For policies that have a guaranteed income benefit of $2,000 a month or less, you will retain 100% of your benefit.

Example – Savings Phase

  • You invested $80,000 in a segregated fund
  • Guaranteed withdrawal balance at the time of failure: $100,000
  • The policy is in the savings phase as you didn’t make any withdrawals in the last 12 months

Guaranteed withdrawal balance at date of failure

$100,000

Explanation

In calculating your Assuris protection, you will retain up to $60,000 or 85% of your guaranteed withdrawal balance, whichever is higher.

Since the amount is more than $60,000, the 85% is applied to the guarantee on your guaranteed withdrawal balance.

Adjusted guaranteed withdrawal balance

$85,000
($100,000 × 85%)

Adjusted guaranteed withdrawal balance

  • You invested $80,000 in a segregated fund
  • Guaranteed withdrawal balance at the time of failure: $100,000
  • The policy is in the savings phase as you didn’t make any withdrawals in the last 12 months

Guaranteed withdrawal balance at date of failure

$100,000

Explanation

In calculating your Assuris protection, you will retain up to $60,000 or 85% of your guaranteed withdrawal balance, whichever is higher.

Since the amount is more than $60,000, the 85% is applied to the guarantee on your guaranteed withdrawal balance.

Adjusted guaranteed withdrawal balance

$85,000
($100,000 × 85%)

Example 2 – Payout Phase

  • You invested $80,000 in a segregated fund
  • Guaranteed income benefit: $5,000 a year
  • The policy is in the payout phase as you have made a withdrawal in the last 12 months

Guaranteed income benefit at date of failure

$417/month
$5,000/year

Explanation

In calculating your Assuris protection, you will retain up to $2,000 or 85% of your Monthly Income Benefit, whichever is higher.

Since the amount is less than $2,000 a month, the guaranteed income benefit is fully protected.

Adjusted guaranteed withdrawal balance

$417/month
$5,000/year

Adjusted guaranteed withdrawal balance

  • You invested $80,000 in a segregated fund
  • Guaranteed income benefit: $5,000 a year
  • The policy is in the payout phase as you have made a withdrawal in the last 12 months

Guaranteed income benefit at date of failure

$417/month
$5,000/year

Explanation

In calculating your Assuris protection, you will retain up to $2,000 or 85% of your Monthly Income Benefit, whichever is higher.

Since the amount is less than $2,000 a month, the guaranteed income benefit is fully protected.

Adjusted guaranteed withdrawal balance

$417/month
$5,000/year

Questions and Answers

1. What happens to my guarantees if I have more than one segregated fund policy?

Assuris protects each member company separately. If you have more than one segregated fund policy with guarantees with the same member company, all similar benefits are added together before Assuris’ protection is applied.

2. What happens if I have a cash value under a whole life policy or universal life policy and a segregated fund with a guarantee?

Segregated fund guarantees receive Assuris’ Cash Value protection. The amount of your guarantee will be added to the cash value of your life policy in determining the amount of your protection. Priority will be given to the cash value under your life policy. Assuris guarantees that you will retain at least 85% of your cash value. For policies that have a cash value benefit of $60,000 or less, you will retain the full amount of your benefit.