Some funds also have a death benefit that pays the guaranteed amount to beneficiaries upon the death of the annuitant (the person whose life is insured). Contract holders can designate one or more beneficiaries. Seg funds can be held in registered accounts such as a registered retirement savings plan (RRSP) or a tax-free savings account (TFSA); when they are held outside a registered account, the contract holder and annuitant can be different people.
Most segregated funds owned through group retirement plans do not have the guaranteed amount feature or death benefit; as a result, their management expense ratios (MERs), the fees charged to investors, are usually lower.
If a life insurance company fails, segregated funds are protected by Assuris, a non-profit consumer agency, which will transfer funds to a solvent company.
Example: “One advantage of segregated funds is that money can be passed directly to a beneficiary without going through the probate process, saving time and avoiding probate fees. Seg funds also offer creditor protection in some circumstances if a contract holder goes bankrupt.”
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