Guarantees on Segregated Funds

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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 from your 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 a benefit under 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

($150,000 × 75%) 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

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 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
  • 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
  • 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

$130,000

Explanation

Since your segregated fund guarantee is more than $100,000, you will retain 90% of your benefit amount.

Adjusted guaranteed withdrawal balance

$117,000
($130,000 × 90%)

Example 2 – Payout Phase

  • You invested $200,000 in a segregated fund
  • 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

$1,041.67/month
$12,500/year

Explanation

Since your monthly income is less than $5,000/month, you will retain the full benefit amount.

Adjusted guaranteed withdrawal balance

$1,041.67/month
$12,500/year