Segregated Funds

In the last two decades, the financial market has seen a tectonic shift in the way investment products are offered to us. Traditional products such as insurance are being offered in combination with market linked instruments. New age products such as Mutual Funds have more or less become a standard part of an individual's portfolio, in India and abroad.

In a quest towards ensuring continuity in innovation, experts have devised a product known as Segregated Funds, an instrument that harnesses the benefits of Mutual Funds and also offers the cover like that of a life insurance. This type of mutual fund is quite well known in countries such as Canada and U.S.

What is Segregated Funds?

It is a type of mutual fund which comes with an insurance cover attached to it. Linked to market performance, a pool of investors come together and invest in a specific fund and the proceeds are reinvested by the fund manager into instruments such as shares, debentures, bonds and other securities with a set goal. Along with the benefits of a mutual fund, a definite sum is assured upon maturity/death of the insured to make it a dual benefit product.

Segregated Funds guaranteed return of premiums of anywhere between 75% to 100%, depending on the insurer. Some funds also offer income at regular intervals such as during post retirement life. In order to reap the benefits of good returns, the insured member should stay invested for a fixed term as pre-agreed with the company offering this type of fund. Some companies require you to pay an additional sum to get the insurance benefit.

Benefits of Segregated Funds

Guaranteed Principal

If you continue to pay the premiums (installments) on a regular basis over a definite term, you can look forward to partial/full returns of the monies invested, depending on the product. Some funds let you to reset the amount guaranteed at frequent intervals so that the returns upon maturity is higher.

Death Benefit

Another prominent advantage of putting your monies in Segregated Funds is the death benefit. For those of you looking forward for the most visible benefit offered by a traditional life insurance, it offers protection for your loved ones.

Higher Returns

Unlike a traditional insurance plan where returns upon maturity is fixed and limited, Segregated Funds are linked to market performance and therefore, one can look forward to pleasing returns over a definite period of time.

A Segregated Fund has its own set of disadvantages, the most prominent being premature withdrawals may mean you will get the current value with a penalty.  

GST rate of 18% applicable for all financial services effective July 1, 2017.

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