Annual Point-to-Point Method

Annual Point-to-Point Method, within the context of an IUL policy, refers to a method of calculating the interest credited to the policy's cash value based on the change in an external index's value over a one-year period. Specifically, the index value is recorded at the beginning and end of the policy year, and the difference between these two points determines the interest to be credited. The credited interest is subject to both a cap (maximum rate) and a floor (minimum rate). This means that even if the linked index has a negative return, the credited interest will not fall below the guaranteed minimum (usually 0%), providing a level of protection against market downturns. Conversely, in years when the index sees significant gains, the credited interest will be limited to the policy's specified cap rate.

Note: The Annual Point-to-Point Method provides a straightforward way to measure index performance over a 12-month period, offering policyholders potential growth based on market performance while also ensuring a degree of downside protection.