FAQ: "Should I Insure My Wine Collection?"
As wine has gained popularity in recent years, more Americans have found themselves investing large sums in the beverage. Most buy for immediate enjoyment. Others receive regular allocations as members of popular Napa Valley wine clubs or have wines shipped back from memorable trips abroad. Many hold rare and valuable bottles back for years—until the wines have reached peak maturity, or as long-term investments to someday liquidate on the bustling secondary market.
For many different reasons, collectors are storing valuable bottles of wine in their homes for significant stretches of time. Most don't give much thought to the risks until something bad happens.
Wine collections have unique vulnerabilities, such as to power outages that result in failures of climate control systems. If a bottle is overheated or if its cork becomes too dry and thus permeable to oxygen, its contents can be destroyed in short order. For the consumer, that means a "cooked" bottle, flat, and lacking any aromatic complexity. For the investor who would have to disclose a potentially damaging incident, it means a total loss of market value regardless of the actual scope of the damage.
Because wine collecting is a relatively new phenomenon in the U.S.—perhaps also because the risks are challenging to mitigate and the damages are invisible to the naked eye of an adjuster—wine collection insurance has remained something of a gray area. Only a few carriers have begun issuing policies.
Whether you should take out such a policy depends on the answers to a few questions. First, what is your collection's estimated value, and how does the cost of insuring your collection compare to the risk of loss? As a rule of thumb, if you're holding wines worth more than $85,000, it's worth looking into insurance. A typical blanket policy covering up to this amount costs approximately $850 per year. That's less than the average cost of one bottle of first-growth Bordeaux. At such a relatively low cost, it can be worth the peace of mind.
Second, what if any coverage can you expect from your standard homeowner's policy, and under what circumstances? Under some policies, the personal property coverage of a total loss of the home might adequately cover your collection. If you have a homeowner's policy that specifically covers valuables, what does it say about sub-limits? Most standard homeowner's policies set relatively low sub-limits (or coverage limits) for valuable items. You also need to understand whether your policy's coverage of valuables includes the causes of harm that are common to wine. Those include climate control issues, breakage, mysterious disappearance, and loss while away from the premises.
The best way to make sure you're fully covered is to review your coverage with an insurance professional who has experience with wine collections. For an expert review and details about the tailored coverage options that exist today, contact Ken Sidlowski by email or at 708-845-3159.
Material posted on this website is for informational purposes only and does not constitute a legal opinion or medical advice. Contact your legal representative or medical professional for information specific to your needs.
