Going beyond homeowner’s coverage may be the safer bet
Peter D. Meltzer
A storm knocks out your power for a week and, by the time you return home, the interior temperature in your climate-controlled wine storage unit reads 95° F. A fire ignites in your basement, engulfing your entire wine cellar in flames.
Your hand slips while decanting a bottle of Château Pétrus 1982, sending the bottle and its precious contents crashing to the floor.
Hopefully, in any of these instances you have insurance. But does that mean you’re actually insured?
Just because you have a homeowner’s policy doesn’t mean that your wine cellar is fully protected. Basic homeowner’s coverage is usually limited to theft or fire. A policy that insures your house for $1 million only covers your dwelling for that amount. It may also include an additional 50 percent of contents coverage, meaning a $1 million policy reimburses the homeowner for closer to $1.5 million. But because wine is included in the contents portion of your home, it is important to find out if your contents coverage is sufficient for covering not only your furnishings, clothing and other household goods, but also your wine collection.
Most homeowner’s policies are further subject to a deductible clause, which can range from hundreds to thousands of dollars. That means you might receive only a fraction of the value of your collection in the event that it is stolen or destroyed.
Ideally, a wine collection, like other valuables such as silver, antiques, coins or fine jewelry, should be separately insured against fire, breakage and theft. If you have a collection worth several thousand dollars, there are two options worth considering: a blanket policy or a stand-alone wine insurance policy. Both cost about the same and give you considerably better coverage than a standard homeowner’s policy.
A blanket policy insures your wine under one lump sum and is appropriate for bottles valued at less than $1,000 each. All you have to do is total the value of the wine to be insured. While no documentation is required, hiring a professional appraiser to itemize your collection can help determine if a blanket policy is right for your entire collection.
A stand-alone policy insures your wines individually and is suitable for collections full of expensive items like older wines or rare large-format bottles. Many collectors opt for a blended policy, scheduling their more expensive bottles and blanketing the less expensive ones.
Under most blanket policies, the maximum coverage per bottle is $10,000. So if someone insures $100,000 worth of wine under a blanket policy, yet happens to have a $25,000 bottle stolen from his cellar, the payout for that bottle would be limited to $10,000. If the same bottle were itemized in a stand-alone policy, it could be covered for up to 150 percent of its original cost, depending on the percentage set by the insurer at the time the policy is made. Thus the “deemed replacement cost” of a $25,000 bottle could be as high as $37,500. In addition, it’s incumbent upon the policy holder to notify his insurance company of any significant increase in the value of his wine collection. A wine listed in the books for $2,000 that has a current value of $10,000 may end up being underinsured.
The premium you pay and the exact coverage you get is a function of your specific insurer. Wine insurance premiums are fairly standard. They cost between 42 and 50 cents per $100 of coverage, which means the typical premium on a $50,000 cellar will run about $250. (Policy holders in California may pay an additional 20 percent for earthquake coverage.) However, unless the applicant already has a homeowner’s or automobile policy with the company in question, few insurers will write a blanket or stand-alone policy for less than a $500 premium; it’s simply not cost-efficient.
All wine insurance policies protect against theft and fire. No deductibles apply against a covered claim. But what happens to the ‘82 Pétrus that is dropped instead of stolen? A few insurers cover their policy holders against accidental breakage. Some provide limited spoilage coverage due to the failure of refrigeration equipment. Others will completely cover wines housed in a storage facility that are damaged due to a mechanical breakdown caused by fire or lightning (but not poor maintenance). Yet others provide full coverage due to equipment malfunction.
For obvious reasons, most companies require that the insured have a central station alarm system for fire and theft. Unfortunately, there is no coverage for a corked, ullaged or madeirized bottle.