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Whisky Insurance: Why Prudence Often Proves The Best Policy

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Whisky Insurance: Why Prudence Often Proves The Best Policy

Whisky Insurance: Why Prudence Often Proves The Best Policy
February 19
13:47 2019

Bruce Stevenson Insurance Brokers’ Graeme Dempster: We find that collectors decide to contact us once their household insurance cannot or will not accommodate their collection.’

‘I realised that whisky insurance was essential when it dawned on me that I had  the equivalent of a valuable vehicle in my closet,’ says Justin’s House of Bourbon proprietor, Justin Sloan, of his decision to seek out adequate cover to protect his collection. ‘People insure everything else and just like a vehicle you want to make sure it’s sufficiently covered.’

While Sloan had a large network of friends to help him get started, sometimes finding a suitable broker to insure a collection can be challenging: ‘Different insurance companies have different caps on what they will insure and under what circumstances. Many organisations will insure whisky, but most policies have their limits. As a collector it’s important to find the right policy for the amount you’re trying to insure.

Justin Sloan: ‘Every six months I send an updated inventory to my insurance contact and each year I’ll get my collection re-evaluated.’

For businesses, the process is a whole lot easier, as any whisky in stock is considered inventory and so therefore it’s far easier to obtain insurance,’ adds Sloan (pictured left). ‘Plus, the upper limit of what is covered is also considerably higher.

Meanwhile, Bruce Stevenson’s Graeme Dempster (pictured above) is conscious of the fact that any loss or damage is most likely to occur during transit: ‘From a collector’s perspective, most would be keen to transfer the financial risk of their collection to an insurer,’ he says . ‘Depending on the values at risk it would be prudent to insure bottles from the immediate moment of purchase. There is no minimum value to insure in respect of the policy but we usually find that collectors decide to contact us once their household insurance cannot or will not accommodate their collection.’

Whisky galore, or whisky no more? It’s best to be insured, should the worse happen

The number of insured whisky collections is on the rise

As collecting becomes more popular, collections continue to grow in size and in value.

‘In the UK, the desire to insure private whisky collections is on the increase,’ adds Dempster. ‘Casual collectors now realise their collections will have some meaningful value, while private collectors are snatching up rare bottles, all of which add to the overall value of the investment.’

Naturally, keeping these collections safe is of the utmost importance. Minimum security requirements include entry/exit doors to the property are secured by five-lever mortice deadlocks, and all accessible windows have key-operated window locks.

Likewise, if the bottles are to be moved, they should be packed properly to withstand the method of transport being used; after all, it is the insured who have a duty to take all reasonable steps to protect the collection from loss or damage.’

There’s a lot of work involved in insuring a collection

Where to start when evaluating a collection?

‘Document everything and keep receipts of what you buy,’ advises Sloan. ‘Obviously, replacement value should be more but it will give you a bottom line starting point as well as a record of when you bought it.

‘Use a spreadsheet or an app to keep track of it all and make sure you stay on top of what your collection is worth.

‘Every six months I send an updated inventory to my insurance contact and each year I’ll get re-evaluated.’

A reputable, licensed broker or bottle shop is far less risky than an auction house when it comes to obtaining legitimate bottles instead of forgeries. As long as verifiable documentation accompanies the purchase, it’s possible to insure rare bottles as well as newer ones.

The onus is on the insured to prove the authenticity, provenance and value of a bottle or collection of whisky in the event of loss or damage,’ says Dempster. ‘While those that are of a greater value aren’t necessarily harder to insure, more information can often be required in relation to their storage and protection.

‘Again the onus is on the insured to verify that the collection is properly looked after and that reasonable care has been taken. Insurers want to know who the insured is, where the collection is stored, what security and fire protection are in place, who has access to the collection and who has provided the valuation.

‘We insure whisky collections held in commercial locations such as bonded warehouses or other storage facilities and if a pub or bar but if the whisky in stock at a bar or pub is to be used for customer consumption, this is not something that can be insured under a private whisky collection policy.’

According to Graeme, things get a little more complicated in a maturation warehouse situation: ‘Rather than being merchandise that is sitting around waiting to ship out, whisky in barrels is merchandise that has to age for a period of time before it can be bottled and sold, and with most whisky there are a lot of variables in play.

‘In addition to standard material damage cover available under a commercial insurance contract, it is advisable to insure the whisky on a maturation basis that will cover both market value at the time of a potential loss and the loss of future matured value (sales value in bottle).’

‘Put simply, if a warehouse stocked with whisky, which is set to mature in ten years, was destroyed by fire at the five-year point, the fire risk insurance policy would pay the five-year-old-whisky market value as at the date of the fire. The maturation wording would then pay the difference between that amount and the value of its intended selling price had it matured as a ten-year-old whisky.

Thereby between the two sections, the distiller would be fully indemnified in respect of the loss of whisky in-store.’

As Sloan pointed out, insuring a personal collection may not always be cost-effective. If you have a few bottles you really love it may be worthwhile to insure just those bottles, but bear in mind that if your teenager cracks them open while you are out of town, your insurance isn’t likely to cover that.

You’re better off securing your collection in a fire safe if you are concerned about something happening to it until you get to a certain point in collecting, and only you can determine where that point will be.

Copyright Maggie Kimberl for Alcoholprofessor.com.

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