Monthly or Daily Averaging is an index crediting strategy affiliated with fixed index annuities measuring changes in the index by calculating multiple dates, the same day each month for monthly averaging. Every day the market is open for daily averaging.
The average of these values is compared with the index value at the start of the index term.
If there is an increase in the comparison, that interest will be created (after any fees, spreads, caps) to your account.
This “averaging” method will serve to moderate market fluctuations.
You cannot lose previously credited interest in your annuity.
With this method, the insurance company looks at the index price at the end of each month of the contract year, adds them together, then divides by 12 to calculate the average.
This average is compared to the index price on day 1 of the contract year.
If the comparison shows an increase, that increase is credited to the contract in the form of a percentage.
Some products place a cap on the increase.
If the comparison shows a decrease, interest credited is 0%, and there would be no loss.
This method for determining any interest credit uses a Daily Average calculation to determine a percentage gain or loss in the index value during your reset period.
This is done by comparing the difference between the index value on the first day of the contract year and the Daily Average index value (usually 252 trading days).
The interest credit will never be less than zero.
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