Indexed Life Crediting Methods
Point-to-Point Crediting Methods
- Annual point-to-point- measure index on day premium goes in (Point A), and again one year later (Point B), subtract the two, and divide them by the second point. (B-A)÷A = point-to-point calculation
- Annual point-to-point with high watermark- same as above, but highest anniversary value is locked-in
- Inverse annual point-to-point- same as annual point-to-point, but policyholder is rewarded by declines in the index rather than gains; caps are applied to any reduction in the index
- Two-year point-to-point- measure index on day premium goes in (Point A), and again two years later (Point B), subtract the two, and divide them by the first point. Note that two-year point-to-point caps are higher than annual point-to-point caps because interest is not credited until the end of a two-year period. Also note that a 16% twoyear point-to-point cap is not equivalent to an annual cap of 8%.
- Term end-point- essentially any point-to-point crediting method longer than a twoyear point-to-point, i.e. three-year point-to-point, five-year point-to-point, etc.
