Separate Account Law and Legal Definition
A separate account is a segregated accounting and reporting account retained by the insurance company apart from its general account. This permits the investor to opt an investment category according to that person’s individual risk tolerance, and the desired level for performance. The separate account can be a generic conservative or aggressive investment allocation, or a specific mutual fund-type account in nature. Some offshore insurance companies permit the separate account holders to specify the type of separate account to open.
The insurance separate accounts are characterized as either managed or non-managed. A managed separate account is equal to a mutual fund and the investments in the separate account are dynamically managed as stocks, bonds or other debt instruments, loans, derivative instruments. A non-managed separate account invests more submissively to the shares of other managed pools of investments like mutual fund shares.