It is laborious and painful. I only do it on very large volumes, and only with key Scriptures. It will double the time it takes to the do the book, (Just FYI). You will spend an inordinate time on it for printed volumes. (i.e. eBooks don't need one because of the search ability ).
You have to click on instances in your Word doc of whatever you want to mark, and it doesn't generally like Bible references, so that makes it harder to deal with. One by one, generally.
I index in InDesign after import from Word. It is tedious there too. There are utilities one can get but Scriptures are a unique problem and require more attention. I assign numbers 1 through 66 for the indexing rules to get all the books to align right when generating the index.