3 Steps to Protect Your Clients’ Fine Wine Collections

But unlike a bond or stock portfolio, a fine wine collection is subject to much more than market risk. Wine can be dropped, frozen, overheated, soaked, stolen, forged, and mistreated in many other ways.

To help their clients with collections guard against these physical risks, wealth advisors should recommend the following three steps: 

1. Keep an inventory and track values. You can’t properly insure a collection if you don’t know what’s in it and how much it’s worth. As the Liv-Ex data show, wine purchased many years ago may have appreciated greatly in value. Values should be updated at least every few years.
   
   
2. Insure your collection with a valuables policy, a.k.a. scheduling. Very few homeowners policies cover the most common causes of damage to wine collections. Those that do may still have limits that won’t fully protect a highly valuable collection. A valuables policy, however, allows you to insure your wine for its full value against all perils, and with no deductible.

   As an additional benefit, valuables policies geared to high-net-worth clients usually offer market value coverage, which means that covered losses will be settled at the scheduled amount or market value up to 150% of the scheduled amount, whichever is higher. This coverage protects the collector against short-term price increases. 

   Superior policies also provide the option to cover the wine collection on a blanket basis. Blanket coverage allows you to declare an overall value for the collection instead of having to list the value of each bottle separately. For collectors with hundreds of bottles or more, blanket coverage can make the insurance process much easier. Many of ACE’s clients choose blanket coverage for most of their collection, while scheduling a few exceptionally valuable bottles on a single item basis.
   
   

3. Take steps to prevent loss.  Even if a collection is adequately insured, most collectors would rather avoid damage than collect on a claim. Safety measures include:

• Keep the temperature between 55 and 60 degrees F. Fluctuations outside that range can accelerate the aging process. If the temperature is maintained with a heating and cooling system, make sure the system has a backup power supply.  For some large collectors, the installation of a redundant or backup temperature and humidity control system may be a wise investment.
• If the wine is kept in a space vulnerable to flooding due to sewer and drain backup, make sure an adequately sized sump pump with a backup power supply is in operation.
• Store bottles on their sides to keep the cork wet and reduce the risk of oxygen intrusion.
• Keep wine away from a constant light source, which may give off heat and damage the wine.
• Choose wine racks made of unfinished wood, and avoid woods like cedar that can impart an odor that affects quality.
• Ensure that wine racks can withstand natural disasters such as an earthquake or hurricane, if the region is prone to such risks.
• When putting collections in transit, hire shippers that specialize in valuable works such as wine. Trucks or vans should be temperature and humidity controlled, and fitted with air ride systems that reduce the risk of damage from shocks, vibration and sudden stops.

Who knows? If a wealth advisor helps prevent a significant loss, the client might suggest sharing a bottle.