Think of it as an investment fund (like a mutual fund) that is offered by a life insurance company. It allows you to grow your money while also providing certain guarantees.

The key feature of segregated funds is that they offer a guarantee to protect a portion of your original investment (e.g., 75% or 100%) if you hold it until the contract matures or upon death. This is what makes it different from regular mutual funds.

In some cases, segregated funds offer protection from creditors, which can be helpful for business owners or professionals.

When you pass away, the money in a segregated fund can go directly to your named beneficiary without going through probate. This can save time and legal fees.

These funds often have higher fees than regular mutual funds because of the guarantees and additional benefits they provide.

In short, segregated funds combine investing with some insurance-like benefits, making them a good option for people who want to grow their money but still want a level of protection or estate planning advantages.