For wine and spirit connoisseurs, the allure of collecting fine bottles is not only a passion but also a significant investment. These collections often represent years of dedication and a considerable financial commitment. As any collector knows, preserving these liquid treasures is of paramount importance, and that's where insurance comes into play.
Wine and spirit collections are susceptible to a variety of risks, including theft, fire, fraud, breakage, and even the unpredictable nature of natural disasters. Without proper controls, the loss of these valuable assets could be financially devastating. Here are some risk management concepts to consider.
Financial
Individual bottle coverage. There are several policy options that cater specifically to the needs of collectors. A scheduled personal property insurance policy gives you the ability to list and value each bottle individually. It covers various perils like fire, theft, and breakage and can be customized to your collection's unique characteristics.
Agreed value. In the event of a loss, the insurer will compensate you based on the predetermined value of the items, which is agreed upon when the policy is initiated. This means that you'll receive the full insured value of your collection in case of a covered loss.
Appraisals. The value of these types of collections is frequently subject to market fluctuations. Economic downturns or changes in consumer preferences can affect the value of your collection, so reappraise them regularly to make sure you are not over- or under-insured.
A related exposure is called provenance, which refers to the history of ownership and storage conditions of a bottle. The lack of clear provenance can decrease the value and authenticity of a bottle when appraised.
Physical
Breakage. Bottles can break during handling, shipping, or storage. Even a minor accident can result in the loss of a significant investment. You may want to consult with a storage specialist if your collection grows to a significant extent. When you are investing in large quantities, it’s essential to confirm that the shipping company has adequate insurance limits and experience handling fragile contents.
Temperature and storage. Improper storage conditions - such as temperature fluctuations, humidity, and exposure to light - can quickly spoil the quality and value of your collection. Insurers often require that you maintain your collection under specific temperature and humidity conditions which not only safeguards your collection but also gives them confidence that you're taking the necessary steps to protect your investment.
A subcategory of this risk is cork taint, a chemical compound that ruins the flavor and aroma of the wine. This risk is particularly prevalent in older bottles with natural corks, so you will want to check your storage area annually to make sure temperature and other factors are within agreed upon limits.
Natural disasters. Earthquakes, floods, fires, and other natural events can quickly damage or destroy a collection if it's not adequately safeguarded. You may wish to proactively move your collection to an offsite storage vault prior to hurricane or wildfire season. Alternatively, you may want to consider installing sensors. Temperature sensors alert you to rising or falling temperatures while water sensors alert you to rising levels resulting from leaking or burst pipes.
Theft and fraud. Wine and spirits are attractive targets for thieves as they are nearly untraceable on the resale market. Security measures, such as signs and cameras, are crucial to protect your investment and may help improve your risk position with carriers. In addition, this market also attracts counterfeiters. Be careful to avoid buying misrepresented stock or fraudulently labeled bottles, as they may not be covered under your policy.
Here for you
A comprehensive risk management strategy, tailored to wine and spirit collectors, is an indispensable tool. We offer you the hands-on experience you want and deserve when it comes to protecting wine and spirit collections. If a loss should occur, we manage negotiations with carriers on your behalf and are relentless when it comes to achieving successful financial outcomes. At Lockton, we’re here for you every step of the way. Cheers!
