Index Tracking

How Does Index Crediting Work?

How does Index crediting work?

Zero is your hero when it comes to the amount of interest you receive when the Index that your CD, Annuity, Indexed universal life insurance, or other index product is down for the predetermined period of time that you have chosen. Instead of taking a loss on a down Index, you simply receive zero interest.

The trade off for taking no market risk from the index you have chosen, is that the amount of interest you receive when your index performs well and moves up over that predetermined period of time, is that your interest can be capped at a certain rate or be a rate less than 100% of the index move because the participation rate is usually less than 100%.