Insurance
What Is a Segregated Fund?
An insurance-based investment product with guarantees a mutual fund doesn't offer — and the tradeoffs that come with them.
Last reviewed July 15, 2026
Reviewed for accuracy and clarity by Sandeep Singh before publication. Learn about our editorial process.
If you've been told to look into a "seg fund" as part of an insurance-based investment strategy, it's worth understanding exactly what that guarantee is actually protecting — and what it costs.
The basic structure
A segregated fund is an investment offered through an insurance contract, holding a pool of investments similar to a mutual fund. The key difference is the guarantee: typically a percentage of your original investment — protected at maturity or on death, regardless of how the underlying investments actually performed.
Comparing segregated funds against mutual funds here is educational — meant to help you understand how the two actually differ, not a recommendation of one over the other. I'm licensed to offer segregated funds specifically; if a conversation ever moves from education into an actual recommendation, that recommendation stays within what I'm licensed and authorized to offer.
What the guarantee actually protects
Most segregated fund contracts guarantee somewhere between 75% and 100% of your original deposits will be returned at a set maturity date (often 10 years) or on death — even if the market value of the underlying investments is lower at that point. It's downside protection, not a guarantee of growth.
What it costs
That protection isn't free. Segregated funds typically carry a higher
MER than a comparable mutual fund, since the extra cost funds the guarantee itself. Over long holding periods, that fee difference compounds — which is exactly why it's worth understanding before comparing products on guarantees alone.
Who this tends to fit
Segregated funds tend to suit people who value capital protection and estate-planning features (like a named beneficiary and potential creditor protection) more than minimizing fees. They're not automatically "better" or "worse" than other investment products — they solve a different problem, at a different cost.
What to do next
Understanding the guarantee-versus-cost tradeoff here is really a specific case of a broader question: how much investment risk actually makes sense for your situation and timeline — covered in full in
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