As the holiday season moves into full swing, many people thinkabout fine wines.

You may plan to give some as gifts, you may be the luckyrecipient of something special, or you may be deciding which onesfrom your cellar are ready to serve to guests.

In all cases, protecting fine wine collections is an importantconsideration. What are the major threats to your wine collectionand how do you guard against them?

According to a recent American International Group Inc. (AIG)study of wine insurance claims over 10 years, water damage fromburst pipes or storms and power outages that disable wine cellarcooling systems are the most significant threats to fine winecollections in the United States.

The threats to wine

The AIG internal study analyzed damage claims from AIG PrivateClient Group clients in the U.S., who include some of the world’stop wine collectors, from 2004 to 2014 to educate wine enthusiastsabout how best to preserve and protect the value of their winecollections. The study shows the top five claims received by AIGduring the period, by percentage:

• Water damage: 26%.
• Power outage: 25%.
• Theft: 21%.
• Natural catastrophe: 18%.
• Breakage: 10%.

Katja Zigerlig, vice president of Art, Wine and Jewelryinsurance for AIG Private Client Group, explains that as people getmore interested in wine, they become more knowledgeable veryquickly. They learn that wines become more expensive as they getolder and closer to the optimum age for drinking, particularly witha very good California cabernet or the very expensive French andItalian wines.

“The great thing about wine is that it’s one of the easiestcollectibles to insure,” Zigerlig adds, “and the insurance is veryimportant because wine is fragile and vulnerable to risk.” Mostclients have a blanket policy that allows them to take an averageof the cost of the valuable bottles. The policy also includes amaximum price per bottle. She explains that it’s common to have a$50,000 blanket policy and a $10,000-per-bottle maximum, althoughcoverage can range from $10,000 to $10 million. The blanket worksbest for most collectors because inventory comes in, is laid up for10 to 20 years, and goes out through consumption, parties orgifting, she adds.

Related: 10 questions to discuss with HNWclients

(Photo: John Harrell/AP Photo)

Smart home technology can help

Unlike the collecting behavior pertaining to other tangibleassets such as collector cars, fine art or jewelry, wineenthusiasts are not as aware of the vulnerabilities tied to theirpassion. Unfortunately this could lead to disappointment at claimtime, as most homeowners policies specifically exclude coverage forperishables such as wine. A good wine insurance policy, Zigerligsays, includes features to protect wine collections, such ascoverage for loss from flood, storms or earthquake; equipmentbreakdown; new acquisitions; and for bottles in transit.

Most of AIG’s private clients with wine collections are inCalifornia, followed by Florida. For these clients, the risk of apower outage for wine coolers or climate-controlled rooms is high.Zigerlig believes that having smart home technology — especially asystem that warns of power failure or a significant drop intemperature — can help reduce the severity of loss and may affect aclient’s rates. This is important for clients who travel or ownseveral homes. Ideally, the smart home system will maintaintemperatures and alert someone like a home manager in case of anycatastrophic failure.

Some clients store their wine in off-premises,climate-controlled storage units, and they obtain insurance on theunits. “But the storage unit policy probably doesn’t cover acatastrophic loss for collectibles, and wine in transit usuallyisn’t covered,” Zigerlig explains. “An additional concern isaccidental breakage. For example, if a client is having a party andsomeone drops a case of expensive wine while moving it from thecellar to the kitchen, the loss is covered with a collectible winepolicy.”

Related: Fact of the week: Americans don’t know much aboutsmart home technology

(Photo: Thinkstock)

Giving wine as gifts

There are a few key things givers should keep in mind whensending fine wines as gifts to collectors, Zigerlig says. Wine canbe compromised whenever it is on the move, and transit also cansubject bottles to temperature fluctuations. “It’s best to minimizethose potential hazards,” she explains. “Rather than sending a winefrom city A to city B, find out if a local wine shop in or nearcity B has that wine, thereby eliminating the long ‘commute.’ Or,consider purchasing wine gifts directly from a winery. Wineries arewell versed in shipping particulars and can also inform you whetherthe state you are sending to accepts shipments of alcohol.”Otherwise, she recommends that you work with a reputable wine shopthat is also experienced in shipping wine, which is usuallyovernight express service.

Collectors who are traveling for the holidays — with wine for aholiday party or Christmas dinner, for example — also need tominimize extensive jostling and temperature extremes. If you’retraveling by plane, Zigerlig advises that you wrap the bottle in aspecially padded wine tote that can be sealed — numerous optionsare available from a good wine shop. “If I transport a bottle in myluggage,” she says, “I put that tote into an additional plasticbag, and wrap it in bulky sweater or shirts for additionalcushioning. There are also TSA-approved professional wine totesthat are insulated and can hold up to six bottles.” If you’retraveling in a car, she recommends that you put the wine into acooler, keep it cushioned so it doesn’t move around, and keep ittemperature controlled.

Guests can be a concern

Clients with wine collections often entertain, and they may havehouse guests for extended periods of time. Some clients withmultiple residences may rent out some properties or allow guests touse the house on the beach in the islands for a few weeks, forexample. In those situations, Zigerlig says, “Lock your cellar orwine cooler and remove particularly valuable bottles.”

She also recommends that wine collectors have a clause in anyrental agreement that the wine is “off limits” to tenants. If thepeople using the property are guests or family members under aninformal arrangement, it’s important to let them know that the wineis off limits as well.

Related: 6 things to know before signing up with ahome-sharing rental site

Department 56 Snow Village collection. (Photo: Rosalie L.Donlon)

Agents should ask about hobbies,collectibles

Many agents with high net worth clients often visit the clientsat home to review policies and coverage needs. The wine is usuallyin storage in the basement or another part of the residence,however, and the agent may not be aware of its existence. “The bestthing agents can do is to ask their clients whether they havespecial collections or about their hobbies,” Zigelig says. “Theagents will then learn about many items, including wine, thatshould have specific coverage.”

“I also advise agents and brokers to review the policy limitswith clients at least annually,” she says. The value of acollection accumulates over several years, and the cost to replaceit can be exorbitant.

Zigerlig has become a wine collector herself, and she travelsextensively. The wine collection coverage provides her with greatpeace of mind. She knows the collection will always be protectedwhether she’s home or not.

Related: The 5 rules for valuingcollectibles

(Photo: Thinkstock)

Top ways to mitigate risk to winecollections

To help wine collectors mitigate risks, AIG Private Client Groupdeveloped a list of wine storage best practices that collectors —and would-be collectors — need to know.

• Avoid placing wine cellars by walls next to the laundry room,the boiler room, the bathroom or other rooms containing numerouswater pipes.
• Avoid storing wine near areas subject to vibrations (washer,dryer or home theater).
• Keep all bottles at least 8 inches off the ground to avoidpotential flood damage.
• Don’t store chemicals, paint or odorous materials near thecollection.
• Avoid storing wine near heat sources and sunlight.
• Ensure glass walls, windows and doors in the wine cellar aredouble-paned and airtight.
• For earthquake-prone areas, seismically retrofit the winecellar, properly secure wine racks and minimize storageheight.
• Make certain your wine cellar includes a vapor barrier thatcontrols humidity — install gaskets and floor sweeps around thedoor and use sealed plastic boxes for outlets, switches andfixtures.
• Purchase a high-quality wine cellar cooling system that isducted, split or through-the wall, and that controls bothtemperature and humidity. Ensure the system is appropriately sizedfor your wine cellar.
• Have back-up parts for the cooling system in the event thatthere is a malfunction (that is, back-up condensing unit, back-upevaporator and back-up HVAC technician).
• Have a back-up generator for your home and have it directlypower your cellar or wine storage unit.

Related: You'll never believe these 11 home insurancereimbursement stories

Are you following us on Facebook?