Why are segregated fund management fees higher?

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Reserves must be kept to protect your guaranteed capital.

A life insurance company holds a reserve in relation to the capital guarantee provided in the policy contract. Because of the need to assess and insure the capital guarantee, the involvement of life insurance is required.

The insurer is required by law to maintain adequate reserves of capital that may be needed to pay any future liability due to a capital loss.  Companies now offering seg fund investments also work in conjunction with a life insurance company to facilitate this reserve and insures the capital guarantee. The management fee charged to the segregated fund includes the cost of that insurance.

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Life Insurance and Segregated Funds Disclaimer

Life Insurance policies vary according to contract terms. Please read any Life Insurance policy contract provided, or the segregated fund summary information folder prospectus before the time of purchase. Full details of coverage, including limitations and exclusions that apply, are set out in the policy of insurance. Commissions, trailing commissions, management fees and expenses may be associated with segregated fund investments which may not be guaranteed and their market value changes daily and past performance is not indicative of future results. A description of the key features of a life insurance policy, a segregated fund; and any applicable individual variable annuity contract is contained in information provided by the company from which it is purchased. Talk to your advisor before making any financial decision. For specific situations, advice should be obtained from the appropriate legal, accounting, tax or other professional advisors. The information provided is accurate to the best of our knowledge as of the date of publication and is general in nature, intended for educational purposes only, and should not be relied upon as a substitute for advice in any specific situation. For specific situations, advice should be obtained from the appropriate legal, accounting, tax or other professional advisors. Rules and their interpretation may change, affecting the accuracy of the information.