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Energy Insurance Terms Explained

When it comes to energy insurance, having a basic understanding of the terms that are commonly used can help you when researching different policy options.

Familiarizing yourself with some of the basic terms can make it easier for you to be certain that you obtain a policy that’s right for you.

Below is a brief overview of some of the commonly used terms in energy insurance.

Actual Cash Value
Actual cash value (ACV) is determined by subtracting depreciation from the replacement value cost. Depreciation is calculated by establishing use left in the item, and determining what percentage of life remains at the time of needed replacement. 

An adjuster (also known as a claims adjuster, or claims agent) is an independent contractor, or an employee of the insurance company, who works for the insurance agency to investigate the claim for damages. The adjuster also offers a recommended settlement.

A deductible is the calculated amount which the insured is responsible for paying during a claim. 

Depreciation is the loss in value that occurs over time. Depreciation is the difference between the item’s value, and replacement value.

Liability Limit
The liability limit is the amount that the insurance policy provides coverage to. There are generally two liability limits, a limit of liability for one person, and another limit for a single accident where more than one person is involved. 

Perils as listed on an insurance policy are the possible causes of damage or loss - fire, theft, flood, etc. Insurance policies usually specify which perils are covered under the policy.

The premium is the cost of the insurance.

Replacement Cost
Replacement cost, or replacement value, is the actual cost to replace property or an asset.

A rider is an attachment to a policy that adjusts or alters the coverage.

Risk Management
Risk management is the management of the various risks to which a company may be subject. It involves analyzing the likelihood of loss and includes weighing the options to minimize loss. Risk management includes taking safety measures to eliminate the risk, and buying insurance.