If you like to invest in anything, then it is obvious that you will always look for the good returns. No one likes to have down side of the investment. There are different types of crediting methods that Insurance Company uses. You might be thinking how come insurance company steps in such article? For your knowledge let me tell you that you are having fixed index annuities that are coming with insurance of the product. If you trade for anything then this is the right way to invest your money. You are having products that are having the offer of insurance. In your investment that you have done in fixed index annuity the crediting method refers to the time frame over which the insurance company credits the interest you have earned.
If you have purchase any one of the fixed index annuities for10-years then the insurance company will credit you with interest every year on the day you opened your account. The crediting take place according to the participation rate, spread, or cap defined by the insurer. The crediting period is one year and the crediting method is point-to-point. All that means is that the crediting will be based on the change in the index from a point to another point a year later. With a fixed index annuity the insurer will provide the details of the participation rate, spread, or cap for only a year in advance. The insurance company will only provide you the details of single year. You can have the details for the second year after the first year is completed.
The special feature about these fixed index annuities is that there are no explicit fees. The insurance company does not take any fees because there are no expenses used by the insurance company to run such system. They will not have any hidden fees. Taking a certificate of deposit from a bank, then you have to give your money to the bank. The bank pays you an interest rate over a period of time on the bases of the amount that you have deposited. The bank makes use of your money by investing it in bonds that pay interest and then sharing some of the amount of the interest payments with you. It is same procedure that you have here in fixed index annuity.