Please explain "segregated funds"

Question: Please explain the difference between mutual fund and segregated funds. More information on segregated funds would be helpful.

Answer:

Segregated funds are offered by life insurance companies and form part of an insurance policy, typically as a deferred annuity. They offer several features not available in regular mutual funds, including guarantees against loss, creditor protection, and estate planning advantages. As well, the foreign content rules do not apply to these funds, at least until Jan. 1, 2002. There is a full chapter on segregated funds in Gordon Pape’s 2000 Buyer’s Guide to Mutual Funds that provides much more detail.