Textbook Notes (367,747)
Canada (161,363)
RSM230H1 (34)
Chapter 20

CSC_Chapter 20 Segregated Funds and Other Insurance Products.pdf

2 Pages
130 Views
Unlock Document

Department
Rotman Commerce
Course
RSM230H1
Professor
Laurence Booth
Semester
Summer

Description
Chapter 20: Segregated Funds and Other Insurance Products December-13-11 12:45 AM Segregated Funds ○ Money is pooled and invested in securities with the goal of enhancing wealth (similar to mutual funds) ○ Only available from insurance companies & structured as insurance contracts • No ownership of the underlying assets: contract is with the insurance company • Exempt from securities laws and subject to insurance laws ○ Separation of annuitant and beneficiary  Annuitant is the person being insured  Beneficiary is the person receiving the benefit (There are restrictions on who can be a beneficiary) Features of Segregated Funds ○ Segregated fundshave unique features that enable them to meet special client needs, such as:  Maturity protection  Death benefits  Creditor protection ○ Regulated by provincial insurance regulators bc they are insurance contracts  Segregated funds are life insurance contracts, known as individual variableinsurancecontracts (IVICs), between a contract holder and an insurance company ○ These special features incur greater costs as such have higher MERs than uninsured funds  MERs incorporate the cost of the guaranteed benefit ○ Investors assigned notional units (because investors are not owners in the fund) so as to compare against mutual funds ○ Contract covers three parties: i. The person who bought the contract - the contract holder or owner of the contract ii. The person on whose life the insurance benefits are based - the annuitant iii. The person who will receive the benefits payable under the contract upon death of the annuitant - the beneficiary. (a contract may have more than one beneficiary) Critical Features of Segregated Funds ○ Segregation of Assets  Funds are “segregated” from the general assets of the insurance company: protection form firm’s bankruptcy ○ Guarantees:  By law have to guarantee at least 75% (usually 100%) of net contributions when contract matures or on death ○ Potential creditor protection  Generally protected against seizure by creditors.  Useful for business owners and professionals in case of unexpected lawsuit or bankruptcy. ○ Cost-Effective Estate Planning  Generally not subject to probate fees (charges by provincial governments based on a percentage of estate’s asset value)  Proceeds pass directly to beneficiary Segregated Funds vs Mutual Funds Features Segregated Funds
More Less

Related notes for RSM230H1

Log In


OR

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


OR

By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.


Submit