What is the purpose of a death benefit in segregated funds?

The purpose of a death benefit in segregated funds is to provide a guarantee to beneficiaries that they will receive a certain amount of money upon the death of the policyholder. Specifically, this benefit typically ensures that the beneficiaries receive at least the amount of the initial investment, regardless of market fluctuations that may occur at the time of the policyholder’s death. This feature is particularly important in a volatile market, as it offers a level of financial security and peace of mind to both the policyholder and their beneficiaries.

The death benefit in segregated funds is fundamentally designed to protect the policyholder's invested capital, ensuring that their loved ones face less financial uncertainty in the event of their passing. This guarantee is a distinctive characteristic of segregated funds compared to many traditional investment products, which do not always offer a similar level of protection.