In the High-Water Mark method for index annuities, what value is compared to the beginning-of-year value?

• A. The lowest index value reached
• B. The average index value for the year
• C. The highest index value reached between anniversaries
• D. The current contract value

Answer: (C)

In this approach the growth credited for the year is determined by how much the index rises from the start-of-year value to its highest point reached during the year. The key measure is the intrayear peak—the highest index value reached between anniversaries. That peak is compared back to the beginning-of-year level to determine any credited interest. If the index never surpasses the start value, no gain is credited. This is why the high-water mark uses the highest intrayear index value, not the lowest, average, or the current contract value, as the benchmark.