This is exactly why insurance-based or insured investments can have a place in your portfolio. These investment options are only available through insurance providers, like Sun Life, and are designed to help you worry less by providing guarantees. Just as you’d insure your car in case of an accident or your home against flood damage, you can also insure your investments.
Our lineup of Sun Life GIFs (segregated fund products), Insurance GICs, and Payout Annuities make up our insured investments line-up. Each of these products have different features and can meet a different set of needs, so let’s go through them.
Sun Life GIFs (segregated fund products)
What are they?
Also known as a guaranteed investment fund (GIF), a segregated fund product has an underlying mutual fund investment, which consists of stocks, bonds, or other securities that can determine the growth of the investment.
Because it’s an insurance product, a segregated fund contract has guarantees that can protect much, or even all, of your original investment if held to maturity.1
Segregated fund products come with insurance guarantees on the market value of your investment. With Sun Life GIFs, the maturity guarantee ensures you’ll receive 75% of your original investment or the current market value—whichever is greater—upon contract maturity.
Some Sun Life GIFs even offer a lifetime guaranteed income feature so that you receive an income for life. With the joint life income option, you and your spouse receive income for as long as you both live.2
Sun Life GIFs also provide a death benefit guarantee. This means your named beneficiary(ies) will receive the guaranteed amount (either 75% or 100%) or the market value of your investment, again, whichever is greater, at the time of the annuitant’s death. This makes Sun Life GIFs an excellent choice if you are worried about estate planning and how the assets inside your segregated fund product will be passed on.
We also offer a Legacy Settlement Option, which gives greater flexibility on how we pay a death benefit to a beneficiary(ies). This allows you to customize the death benefit to provide a lump sum payment, a steady stream of lifetime income, income for a specified time, or any combination of these options.3
What’s the catch? While segregated fund products have several potential advantages over mutual funds, depending on an investor’s needs, there are trade-offs, including: cost. In general, segregated funds have higher fees, called management expense ratios (MERs), than mutual funds, in order to cover the risks borne by the insurer that is offering the guarantees. This cost shouldn’t dissuade you from holding a portion of your investments in segregated funds, but it should be factored into the decision when discussing investment options with your advisor.
Insurance GICs are a simple, straightforward and low-risk investment. They provide principal protection and guaranteed interest to grow and protect your savings.
What are they?
An Insurance GIC is an accumulation annuity; an agreement between an investor and an insurance company that guarantees a rate of return in exchange for keeping a deposit for a certain period of time. It combines some of the benefits of a bank guaranteed investment certificate (GIC) with the protection and estate planning advantages of an insurance contract.
Insurance GICs can also meet your evolving financial needs by easily converting into an income stream at retirement. Unlike GICs offered through the banks, an Insurance GIC allows you to name a beneficiary on all registration types including non-registered funds. This means the death benefit is paid directly and privately to the beneficiary(ies) avoiding potential fees, delays and complexities of settling an estate.
Similar to our Sun Life GIFs, we offer a Legacy Settlement Option as well to give you greater flexibility on how the death benefit is paid to beneficiary(ies). 3
Payout Annuities can help you cover essential living expenses or fixed costs with guaranteed income payments for the rest of your life or a specific period of time.
What are they?
A Payout Annuity is your guaranteed paycheque. You pay an insurance company a non-refundable principal investment, or what’s called a premium, and they commit to paying you a specified income amount for either a certain period of time (a term certain annuity), or for the rest of your life (a life annuity).
You have the option to use non-registered or registered funds, such as from a defined benefit (DB) or defined contribution (DC) pension plan, registered retirement savings plan (RRSP), and registered retirement income fund (RRIF) to purchase an annuity.
If you’re nearing or in retirement, it’s key to ensure that essential living expenses like groceries, housing costs, and medications are always covered for the remainder of your life. Payout Annuities help cover these essential expenses and protect you from the risk of outliving your money with guaranteed income.
Payout Annuities may also provide the highest level of guaranteed lifetime income available when compared to other income generating products. The income may also be tax efficient in that it may qualify for tax credits and pension income splitting.
Furthermore, Payout Annuities are a set-it-and-forget-it product; there’s no active investment management required. And, despite their simplicity, Payout Annuities still allow for customization, such as adding a guaranteed period that provides a death benefit to a beneficiary and income indexing that can help offset the negative effect of inflation.
Common benefits of all these products
Segregated fund products (GIFs), Insurance GICs, and Payout Annuities are insurance contracts, which means they carry estate planning benefits, such as the ability to name a beneficiary on non-registered funds which allows the death benefit to bypass probate. This will save time and money as probate often comes with fees that can erode the value of the estate and take months, or even years, to settle. Poor estate planning can greatly impact the legacy you leave for the next generation and cause stressful, potentially expensive delays. Insurance contracts can help make sure your beneficiaries receive their inheritance quickly and without additional costs.
In addition, these products have the potential to protect the assets in the investments from creditors. This means your personal assets may be protected from professional liability in certain circumstances.
Lastly, your money is protected by Assuris, which is a not-for-profit organization that protects Canadian policyholders if their insurance company fails.4
Sun Life Global Investments offers Canadians a diverse lineup of mutual funds, portfolio solutions and guaranteed investments, empowering them to pursue their financial goals at every life stage. We bring together the strength of one of Canada’s most trusted names in financial services with some of the best asset managers from around the world to deliver a truly global investment platform. For more information, please visit sunlifeglobalinvestments.com or follow us on Twitter @SLGI_Canada.
We are here for you! Here is a glossary of some frequently used terms to help you better understand your insured investment contract.
Contract: The agreement between you and Sun Life.
Policy: The contract between you and the insurance provider.
Probate: The legal process that certifies the validity of a will and the authority of the executor(s) to facilitate the transfers of assets to heirs.
Owner: When you buy a Sun Life policy, you are the owner of the insurance policy/contract.
Annuitant: We pay the insurance benefits based on this person’s life. The owner and annuitant can be different people, but only if the funds are non-registered.
Beneficiary: You name a beneficiary to receive the benefits from your policy/contract when the annuitant dies.
Deposits: Money you put into the policy/contract. You can make one-time (lump-sum) deposits, or in some cases, make ongoing deposits.
Death benefit: Upon the annuitant’s death, this is the amount paid to the named beneficiary(ies).
Maturity benefit guarantee: On the segregated fund contract’s maturity date, you receive a maturity benefit. It will be the greater of the market value or 75%1 of your deposits.
Death benefit guarantee: When the annuitant of a segregated fund contract dies, your beneficiary receives the greater of the market value or the death benefit.
Lifetime guaranteed income3: Some segregated fund contracts offer this feature so that you receive an income for life. With the joint life income option, you and your spouse receive income for as long as you both live.
Legacy settlement option: You choose how the death benefit from your policy/contract is distributed to your beneficiary(ies). You’re in control and can tailor payments to the unique needs of your beneficiary(ies).
Bypass of probate: The death benefit the named beneficiary(ies) receive(s) isn’t part of the estate. Your beneficiary receives money quickly and privately.
Potential creditor protection: In certain situations, creditors won’t be able to make a claim against your Sun Life insurance policy/contract.
1 Segregated fund contracts/Guaranteed investment funds offer minimum 75% maturity and death benefit guarantees. In some cases, a 100% death benefit guarantee may be offered.
2 Withdrawals will proporationately reduce the guarantees.
3 Lifetime income or income for a specified time is made possible by a Payout Annuity. The Payout Annuity must be allowed under the Income Tax Act (Canada). For locked-in funds, the death benefit is paid according to applicable pension law.
4 You can learn more about Assuris at www.assuris.ca.
Sun Life Global Investments is a trade name of SLGI Asset Management Inc., Sun Life Assurance Company of Canada and Sun Life Financial Trust Inc. Sun Life Assurance Company of Canada is the issuer of guaranteed insurance contracts, including Accumulation Annuities (Insurance GICs), Payout Annuities, and Individual Variable Insurance Contracts (Sun Life GIFs). Any amount that is allocated to a segregated fund is invested at the risk of the contract owner and may increase or decrease in value.
© Sun Life Assurance Company of Canada, and its licensors, 2022. Sun Life Assurance Company of Canada is a member of the Sun Life group of companies. All rights reserved.