How Does The Point To Point Work?

Shawn Plummer

CEO, The Annuity Expert

Annual Point-to-Point with a Cap

The point-to-point is a simple interest crediting strategy used to measure growth in an index annuity.

Annual point-to-point uses the index value from only two points in time, so it may be a good choice if you want to minimize the effects of mid-year market volatility.

With this method, the insurance company compares the index price at the end of the index term to its price at the beginning of the term for one year.

If the price has increased, the interest credited to the contract will equal the percentage of the index price increase, up to a cap or a participation rate.

If the price has decreased, the interest credited is 0%, and there would be no loss.

This method will typically perform best when the index posts modest and relatively stable gains each year.

How it works:

  • On your applicable contract anniversary, the index value from the beginning of the crediting period is compared to the index value from the end of the crediting period.
  • The percentage of change in the index is calculated.
  • If the ending index value is higher than the beginning index value, a participation rate, a cap, or a spread is applied to determine the amount of indexed interest you will receive.
  • If the value is lower, you won’t receive indexed interest.
  • If the final result is negative, no indexed interest would be credited and your contract value would remain unchanged.

2-year point-to-point

2-year point-to-point uses the index value from two points in time two contract years apart, so it may be a good choice if you want to minimize the effects of volatility between those two points.

How Does Money Grow In An FIA?

Want To Find The Best Point To Point Annuity?

Contact Us

Why you can trust The Annuity Expert

At The Annuity Expert, we strive to help you make confident financial decisions regarding annuities. Content provided is created by an independent licensed financial professional.

The Annuity Expert is an online insurance agency that provides the widest variety of annuities in the United States. When you buy an annuity directly from us, we receive a predetermined commission from the insurance company (not you). While your annuity is active, clients are not charged any servicing or management fees. Learn more.

Shawn Plummer

CEO, The Annuity Expert

I’m a licensed financial professional focusing on annuities and insurance for more than a decade. My former role was training financial advisors, including for a Fortune Global 500 insurance company. I’ve been featured in Time Magazine, Yahoo! Finance, MSN, SmartAsset, Entrepreneur, Bloomberg, The Simple Dollar, U.S. News and World Report, and Women’s Health Magazine.

The Annuity Expert is an online insurance agency servicing consumers across the United States. My goal is to help you take the guesswork out of retirement planning or find the best insurance coverage at the cheapest rates for you. 

Scroll to Top