With a wide range of benefits that include tax deferred accumulation, potential to earn interest linked to an index and protection against loss of principal, fixed index annuities (FIAs) can be a great component in an individual’s overall retirement plan. However, even though FIAs can be a great way for individuals to protect their assets while growing their wealth, they’re sometimes misunderstood.

Agents that truly understand the benefits of FIAs can help their clients decide if this annuity type is right for them, based on their retirement status, current and future financial needs and long-term financial goals and objectives. Here are seven key facts about FIAs:

1. The principal is loss-protected: Index annuities are guaranteed against losses during market downturns, differing from securities or even variable annuities. And the annuity value never dips below the initial purchase price.

2. FIAs are great performers: According to a study by David F. Babbel, Professor of Insurance and Finance at The Wharton School at the University of Pennsylvania, since inception in 1995 many FIAs have outperformed corporate and government bonds, equity mutual funds, and money markets in any combination.

3. Increases in value are locked in and cannot be lost: FIAs have a feature known as an “annual reset.” According to Annuity Digest, an annual reset is an FIA crediting method. Annual reset indicates that the level of credited interest is based on the difference in an index value over the course of a year. The annual reset process begins every year.

4. Income on an FIA is tax-deferred: Individuals don’t pay taxes on accumulations until they withdraw from the policy. As an added bonus, individuals can accumulate faster because they are also earning interest on the money they would otherwise have paid taxes on.

5. FIAs are safe: FIAs are backed by the insurer that issues the policy. In addition, State Guaranty Associations guarantee a specific value per annuity—which varies from one state to another—if the insurance company should run into financial problems.

6. Money invested in an FIA is not all tied up indefinitely: Even though most index annuities require a surrender period that ranges from five to 14 years, nearly all such annuities enable individuals to withdraw a maximum of 10 percent of the annuity’s value every year without incurring financial penalties.

7. FIAs are passed along to beneficiaries: If an FIA-owning individual passes away, the annuity can still financially protect his or her children or spouse. According to Retirement Think Tank, the “named beneficiary will receive the proceeds from the annuity, which is typically the accumulation value of the policy without any type of surrender penalty. In most cases, a lump-sum or payout over a specified period of time can be taken.” The value of the FIA also passes directly to the beneficiary, who then avoids the expense and delays that often come with probate court.