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Your Guide to Helping Clients Protect Their Wine Collections

Wine collecting is an area of the luxury market that has grown significantly in recent years—with unique and ever-present risks from water damage to cleaning chemicals. Here's how agents can guide clients on protecting their collections.
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Wine collecting is an area of the luxury market that has grown significantly in recent years. In 2017, the global wine market was valued at approximately $302.02 billion and is expected to generate revenue of around $423.59 billion by the end of 2023, according to Zion Market Research.

While a majority of these sales—$295 billion to be exact—were retail sales from wineries, distributors, or restaurants directly to consumers, $5 billion of these transactions took place in the secondary market—through resales, auctions or other investment-driven purchases.

As investment-driven wine purchases have grown, wine collecting has also become a passion for many successful individuals. As a result, it can present a wonderful way for insurance agents and brokers to connect with clients and offer them guidance on how to best protect their collections, whether they plan to enjoy the wine or use it as an investment vehicle.

Water into Wine: Protecting Collections from the Elements

The wine market has significant upsides, but some collectors may not be as familiar with its unique and ever-present risks. For example, something as simple as heat, sunlight or water can irreparably damage a collection—these elements can change the condition of the cork, bottle, label or wine itself and affect both its taste and price.

When looking at the main drivers of damage, it might not come as a surprise that water is the leading source of loss to wine, just as it is for homes. In fact, in 2019, roughly 37% of wine claims were the result of water damage, according to Chubb. Most claims are caused by “dirty water" from sump pump failure or sewage backups. However, “clean water" issues can also result in significant losses, such as a burst pipe overhead that may break or destroy bottles.

But the critical issue with water damage is that it is rarely limited to one area. A burst pipe could cause anything from a relatively minor wall leak to more substantial foundation damage to an entire ceiling collapse. If that ceiling was located directly above the homeowners' wine cellar, this single burst pipe could cause upwards of six-figures in damages to the cellar and basement, in addition to destroying an entire wine collection, which could include hundreds of bottles.

From both the high number and pervasive nature of water-related losses, we can see how important preventative tools such as water shut-off devices or tech-enabled leak detectors are to protecting a wine collection.

In addition to protecting against water-related damages, tech devices can also help to monitor and protect against the second-highest source of wine-related losses: electrical or mechanical issues. In 2019, roughly 31% of wine claims were the result of electrical breakdown or mechanical failure, according to Chubb.

Wine requires strict climate controls with minimal fluctuations. It should be stored at roughly 55 degrees Fahrenheit and around 65-70% humidity. Warmer temperatures can spoil or ruin the flavor of the wine.

If climate control is lost through mechanical or electrical failures, it is possible that an entire collection of wine could be ruined. However, by using Internet of Things-connected sensors, collectors can actively monitor their wine storage environment and will be immediately alerted of any changes in temperature and humidity levels, enabling them to act quickly and preserve their collection.

Cherry Notes with a Hint of Cleaning Chemicals: The Cellar

Maintaining temperature and humidity are critical to preserving a collection, but outside of a monitoring device, how can a collector help ensure their wine is best protected?

As more and more individuals are adding to their wine collections, there is also a growing interest in building custom cellars with many preferring to keep their collections in their homes. At-home wine cellars can range from converted closets with climate systems to elaborate purpose-built spaces with moisture barriers, air filtration and biometric scanners for access.

However, the most important function of any designated wine storage area is maintaining proper storage conditions and minimizing environmental fluctuations. For wine to age properly and achieve its maximum potential, both in terms of taste and value, it needs to be stored in carefully controlled conditions.

Wine is a living product, and how it is stored will determine how fast or slowly the wine will age. Wine should be stored on its side in a clean, dark, slightly damp place with good ventilation and consistent temperature.

When creating a wine storage area, it is important to consult with a specialist on everything from ideal cellar conditions and location in the home to protecting a collection in catastrophe-exposed regions.

To properly mitigate risks associated with storing a wine collection, collectors should ensure that:

  • Storage racks are secured to the wall, especially in earthquake-prone areas.
  • No cleaning chemicals are used in the area where wine is stored, as they can seep into corks and ruin the wine.
  • Technology-enabled sensors are utilized to monitor for flood and water leaks, along with temperature and humidity.
  • Back-up generators are used to maintain climate control and alarms in the event of a power outage.

Uncorking Wine Coverage

Offering advice and counsel to help your clients mitigate risks is always important, but when issues do happen, it is also critical to make sure they have the right comprehensive insurance coverage in place. Collectors may think they are covered through their homeowners policy, but a separate valuable articles policy actually provides the most comprehensive coverage for wine.

What's the difference? Many homeowners' policies may have a deductible and only provide a low sublimit for wine spoilage. Some even exclude spoilage or breakage altogether. As a result, collectors should seek coverage through a valuables policy which can cover risks related to accidental breakage, damage during shipping and transit, off-site storage and cellar power outages or mechanical breakdowns, as well as losses from theft, fire and water.

It's also important for you to advise clients about a valuables policy that offers worldwide coverage with no deductible, along with automatic coverage for newly acquired bottles. That is, if an itemized policy is already in place. This way, you can be sure that your clients' collections are appropriately insured.

Laura Doyle is vice president and art, jewelry & valuable collections manager at Chubb Personal Risk Services


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Monday, December 21, 2020
Personal Lines