Making Sure of Your Wine Insurance
wine-searcher.com, December 14, 2020
If you think your home insurance policy covers your wine collection, you better take a closer look.
Most home insurance policies do not cover wine, says Melissa Smith, who does wine collection valuations for her company Enotrias. And most people don't find out until it's too late.
Among her contacts are Steve and Betsy Moulds, who own a vineyard and home in the Oak Knoll District of Napa Valley. Smith says the Moulds had a 3000-bottle cellar, including bottles of historic value, like 100-year-old Madeira, and personally important wines like bottlings made from their vines.
"When the earthquake hit, they lost 2000 bottles of their 3000-bottle collection," Smith said. "They got nothing [from their home insurance policy]. Nothing. They didn't get a dime."
The Moulds' case is actually a little unusual because bottles that are broken are easily certified as damaged. Much more commonplace are heat-damaged or flood-damaged wines. Heat damage – or freezing – is rarely if ever covered in a traditional insurance policy. Flood damage will reduce the value of wines by ruining the labels, but it's very hard to get a home insurance company to pay off if the bottle is unharmed.
A big problem for insurance companies is valuation, said Dan Frankel, principal at Insuremywine.com in Boston. It's hard enough for wine professionals to agree on what wines are worth, and most insurance companies don't have wine specialists.
"Most home insurance companies, they struggle with jewelry, let alone wine," Frankel said. "Fine wine is something home insurance companies aren't prepared to value."
The value of valuations
Frankel said it's worth using a site like Wine-Searcher as a resource for a preliminary evaluation. Or it might be worth hiring someone like Smith to go through your collection and appraise it. If you are married, but think there's a chance that it might not be permanent, there's another reason. Smith, who was previously head sommelier at a fine wine retail store in San Francisco, said divorces are one of her main sources of business.
"When you inherit a collection or you're going through a divorce, you have to decide whether you want to split up the collection or sell the whole thing," Smith said. "That's not the only wine issue in a divorce. Who gets the rights to the wine club? Who gets the Sine Qua Non allocation? Who has access to the collection? Can you drink the wines? It's one of the reasons I encourage people to drink what you have when you have it and not wait for an occasion."
Nobody knows the truth of that better than a wine insurance expert. Smith says one client of hers bought a $200,000 insurance policy, at high rates, just to cover moving his wine across the country.
"The refrigeration failed in the wrong direction, and everything froze and was ruined," Smith said. "They got $200,000 in insurance but they lost $4 million worth of wine."
This is why valuations matter. Frankel said there are two main ways to insure your wine collection: with a blanket policy that pays off a total amount that you choose, or with an itemized policy, which is cheaper, but which needs to be updated.
"With a blanket policy you pick a number with a little bit of headroom," Frankel told Wine-Searcher. "In most cases, even if you're drinking $200 bottles every night, it's unlikely that your $250,000 collection is affected by one night of drinking The rate is lower for itemized collections. But with blanket policies, you only need to update it annually. With an itemized policy, if you drank a bottle, it would be fraudulent to claim it as a loss."
Speaking of fraud, as the victims of Rudy Kurniawan know, Frankel said you can't buy insurance against counterfeits.
"That is a big risk, but it is no different from the risk you have of being passed a fake $100 bill," Frankel said. "You cannot insure fraud or intentional acts. You can insure unpredictable random acts. When you purchase insurance, you're stating that you have a half-million dollar collection. If it turns out that your collection is full of counterfeit bottles, that's a risk. And not insurable."
Smith said that if you store your wine anywhere other than home, you're also taking a big risk.
"Offsite places do not provide insurance," Smith said. "So many times, we've all read the stories, the owner of the place starts drinking some of the wines from the clients and the next thing you know, there's a fire. One of the main calls I get is, should I trust this person to store my wine? It's really hard. Especially if they have retail."
Smith says California's more frequent wildfires have led many wineries to increase the insurance on their winery's wines, but she often finds the same people have personal collections that are not insured.
"People start buying a case here, a case there and they don't even think about it until something catastrophic happens," Smith said.
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