Point to Point

Point to point is a term that refers to a fixed indexed annuity crediting method. Indexed annuities credit a level of interest to the contract owner. This level of credited interest can be based on or linked to the performance of equity markets. Point to point means that the level of credited interest is based on the difference (or a percentage of the difference) in an index value over some period of time. For example, say that the S&P 500 index is 1,000 at the beginning of a given year. Next assume that this index increases to 1,100 at the end of that same year. The difference between these two points in time is 100 points or 10 percent of the starting index value. In this case, the contract owner would likely be credited a level of interest--based on an interest cap or participation rate--that is some portion of the 10 percent.

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