Purchasers of fixed indexed annuities also must pick the method of determining any increase in the index they choose for his/her policy. The three most common methods are "annual point-to-point", "monthly average" and "monthly sum" also commonly referred to as "monthly point-to-point". The "annual point-to-point" method determines the value of the index on issue date of the policy and compares it to the value of that index on a date in the future (generally one year later) to determine the calculated return. The "monthly average" method looks at the value of the index on the issue date, then on each monthly anniversary throughout the policy year.
The monthly index values are then averaged and compared with the initial index value to determine the calculated return. The "monthly sum" interest crediting method tracked each month (subject to a cap each month) and the results from each month are summed to get the annual interest rate credited.