Annual Point to Point and Annual Reset Provisions

Another equity index annuity crediting option is the annual point to point.  The value of the interest added to the account is simply determined by the growth from one point in the year to another.  The first point is generally the S&P 500 value at the start of your contract, with the end point as the last S&P 500 value at one year's period of time.  The equity index annuity account then has an annual reset provision starting the process over again.

An annual point to point contract allows for the previous year's market performance to not affect the performance of the account in future years. The interest earned by the market performance is added to the account on a yearly basis.  In years in which the market increases in value, the equity index account is credited a portion of that growth (see Equity Indexed Annuities Cap and Participation Rates to learn why only a portion is credited).

When the market is down for the year, rather than decrease the value of the account, the fixed index annuity simply reverts to the minimum pre-determined interest rate (can be as low as 0%).  This allows you to protect your principal, but also participate in years in which the market is up.