Guarantees on Segregated Funds
Product
A segregated fund is an investment fund that accumulates value by investing in securities such as stocks and bonds. The death and maturity guarantees ensure that the policyholder will retain a minimum amount of their investment regardless of market performance. Typically, the guarantee on an individual segregated fund policy is 75% or 100% of what the policyholder invested.
The Guarantees
Guarantees that may be offered on a segregated fund policy are:
- Guaranteed amount at death
- Guaranteed amount at a specified maturity date
- Guaranteed withdrawal amounts
- Guaranteed income benefit
The guarantee on a segregated fund is protected under the “Investments / Savings” category in the Assuris protection.
Assuris Protection
If your life and health insurance company fails, Assuris guarantees that you will retain up to $100,000 or 90% of your benefit amount, whichever is higher.
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
Since your segregated fund guarantee is less than $100,000, you will retain your full benefit amount.
$75,000
Protected benefit amount
Example 2
- You invested $150,000 in a segregated fund
- The guarantee on the segregated fund is 75% at death or maturity
Guarantee on your segregated fund
$112,500
Guaranteed amount at death or maturity
Since your segregated fund guarantee is more than $100,000, you will retain 90% of your benefit amount.
$101,250
($112,500 × 90%)
Adjusted benefit amount
Example 3
- You invested $200,000 in a segregated fund
- The guarantee on the segregated fund is 100% at death or maturity
Guarantee on your segregated fund
$200,000
Guaranteed amount at death or maturity
Since your segregated fund guarantee is more than $100,000, you will retain 90% of your benefit amount.
$180,000
($200,000 × 90%)
Adjusted benefit amount
Guaranteed Minimum Withdrawal Benefit
The Benefit
- 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
- The guaranteed withdrawal balance provides a guaranteed rate of growth in the savings phase;
- 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 and health 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
- If no withdrawals have been made by the policyholder in the last 12 months
- The payout phase
- If a withdrawal was made by the policyholder in the last 12 months
Assuris Protection
If your life and health insurance company fails, the value of your fund will not be impacted.
- In the saving phase: Assuris guarantees that you will retain up to $100,000 or 90% of your promised guaranteed withdrawal balance.
or - In the payout phase: Assuris guarantees that you will retain up to $5,000/month or 90% of your promised guaranteed income benefit.
Example – Savings Phase
- You invested $100,000 in a segregated fund
- The guarantee on the segregated fund is 100% at death or maturity.
- Guaranteed withdrawal balance at the time of failure: $130,000
- 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
Explanation
Adjusted guaranteed withdrawal balance
$117,000
($130,000 × 90%)
Example 2 – Payout Phase
- You invested $200,000 in a segregated fund
- The guarantee on the segregated fund is 100% at death or maturity.
- Guaranteed income benefit: $12,500 a year
- The policy is in the payout phase as you have made a withdrawal in the last 12 months
Guaranteed withdrawal balance at date of failure
Explanation
Adjusted guaranteed withdrawal balance
$1,041.67/month
$12,500/year
Since your monthly income is less than $5,000/month, you will retain the full benefit amount.
$1,041.67/month
$12,500/year
