Picture your ideal Napa Valley wine cellar, filled to the ceiling with priceless bottles from your favorite cult wineries, from Scarecrow to Sine Qua Non to Screaming Eagle. One early morning, you’re startled awake by a massive earthquake; later, when you open the door to check on your cellar, you find that nearly every bottle has been shattered, gone forever. This exact scenario happened to a few Napa Valley wineries and collectors in 2014, when an earthquake destroyed millions of dollars’ worth of wine bottles within a few short minutes. Silver Oak’s CEO David Duncan told a journalist that he lost hundreds of bottles, including every bottle of a special-edition blend that hadn’t yet been released. It’s impossible for wineries and collectors to prevent natural disasters, which is why wine insurance is so crucial for every serious collector. Wine insurance isn’t one-size-fits-all, though, and that’s why we’re going to explain how to know when you’re ready for insurance, and which plan is right for you.
How Do You Know When You’re Ready?
If you’re a serious collector who already invests in the world’s top vintages, chances are good that you’ve considered insuring your wine collection already. However, too many collectors on today’s market feel that insurance is a waste of time and money, even as their collections grow from a handful of fine wines into a massive, investment-heavy stockpile. Contrary to what you might have heard, you don’t need to think of your wine as a resale investment in order to benefit from an insurance policy. Collectors who spend 10 percent or more of their monthly budgets on wine need insurance, even if they plan on drinking every bottle themselves. Insurance expert Yannick Daucourt explains, “They do it for the passion, because they like to drink the wine more than to sell it. Then, they suddenly realize that it has risen in value and they show more interest in insuring it.”
The number one reason to consider wine insurance is if you’re maintaining your own cellar at home. Even if you never plan on selling a single bottle from your home collection, you will still want insurance for any of your especially fine bottles of wine. Home cellars are notoriously difficult to maintain; about 75 percent of all paid wine insurance claims are the direct result of unexpected home cellar problems. These claims cover bottle damage from poor temperature control in home cellars, power outages that cause spoilage, and theft. All of these issues are more common in home cellars than in third party storage facilities run by professionals. Collectors with home cellars should consider adding a wine clause in their home insurance policies, and should strongly consider a standalone policy with a separate insurance company as well, depending on how much fine wine they own.
Let’s say you’re confident in your security system and temperature controls in your home cellar, or you store your wines with a third party. Do you need wine insurance too? In many cases, the answer is yes. You know you’re ready for insurance whenever you buy wines that you would be sorely disappointed to lose in an accident. The actual market value of the wine doesn’t matter as much as your attachment to the wine. For example, you might own a rare bottle of Madeira that is only worth about $100 on the market, but that is extremely difficult to find, and would be a bottle that you would hate to lose.
When you collect bottles outside of your home cellar, you can’t always insure them under your homeowner’s insurance, but you should still invest in third party, standalone insurance if your collection is worth about $1,000 or more. The only collectors who can safely avoid wine insurance are those who own less than $1,000 worth of wines that they can afford to lose.
The Best Plan: Homeowner’s Rider or a Blanket Policy?
Now that you’ve determined whether you need insurance, you will need to choose an insurance policy suited to your collection. Anyone who calls himself a “wine collector” should at least have a basic clause in his homeowner’s insurance covering his wine bottles. Homeowner’s insurance riders are the perfect option for most collectors who own less than $10,000 worth of wine. Your homeowner’s insurance is designed to protect your small wine collection from serious losses; however, these policies often come with a hefty deductible. If your homeowner’s insurance rider carries a $1,000 deductible on the policy before your claim payment kicks in, don’t insure a $500 wine collection under this policy. If your collection is worth much more than $1,000, it’s worth paying a little extra every month on your homeowner’s insurance in case you lose your entire collection in a natural disaster. The minimum worth of your collection and the deductible depends on your current homeowner’s insurance policy. Let’s say you have a collection worth $6,000; if you lose all of your bottles in a flood, your insurance could pay out about $5,000 in damages, and you will only lose the deductible amount (in this case, $1,000).
Before you call up your insurance provider, be aware that most homeowner’s policies don’t cover problems like temperature control malfunctions, wine fraud, or power outages that cause spoilage. Collectors who can’t add these scenarios to their homeowner’s insurance rider will need to use a third party insurance company instead. Most serious collectors will find that separate wine insurance is the better option for extensive wine collections, since wine-specific policies are designed to cover more unexpected events than homeowner’s policies. When you go with separate insurance for your wine, you have two basic options: bottle-by-bottle coverage or blanket coverage.
Blanket coverage is perfectly appropriate for collections that are worth less than $10,000, but that need more coverage than the homeowner’s policy can provide. When you choose this option, an appraiser determines the true market value of your wine, and the insurance actuary decides how much your insurance policy will cover, based on the wine’s market value. You negotiate which scenarios you want to have coverage against, and pay a flat fee every month. Should anything happen to any bottle in your collection, your insurance will cover the damage, up to the maximum specified on the policy.
Some insurance companies only insure up to a certain dollar amount, which can become complicated for collectors with huge collections. For this reason, standalone, bottle-by-bottle coverage is the best option for collections that are worth more than $10,000. When you have this much wine, some bottles are going to be worth more than others, and you will want special protections for your most highly-prized wines, rather than covering the entirety of your collection. If you lost a $40 bottle of Oregon Pinot Noir, you wouldn’t be nearly as upset as if you lost a bottle of vintage Le Pin. Why spend thousands of dollars insuring all 15,000 bottles of wine that you own, when you can spend much less insuring the 1,000 most highly-valued bottles in your collection? Bottle-by-bottle coverage is more customizable, taking into consideration not just the basic market worth of your bottle, but the possible projected loss that you will experience if you lose that bottle. Your high-end bottles are no longer one small part of a huge collection, but they are valued individually, potentially allowing you to receive better compensation if the bottles are ruined.
Whether you are starting your high-end wine collection or adding to an established portfolio, Vinfolio is your partner in buying,selling, and professional storage. Contact us today to get access to the world’s finest wine.
Harley is an Executive Wine Specialist for Vinfolio, helping collectors find the best wines for their collection. He’s a lover of everything outdoors and the proper bottles to go along with it. You can find him at any of the newest cocktail bars and restaurants in SF or on an adventure somewhere in between Lake Tahoe and the California coastline.