Bunker Insurance Revisited

[Underhilltab]

I've seen a few threads in the past on this topic, but I thought I would raise it again since the last one I found was from a few years ago and there are probably more people these days with large/growing bunkers.

Has anybody looked into protecting their bunker contents from theft, accidental breakage, earthquakes, floods, climate changes, power failures, etc.?

Some homeowners insurance policies/riders may provide coverage, but my experience is that not many do or, if they do, it is not adequate in terms of an overall limit, a per item limit, and/or the method used to cover a loss, etc.

I have also found that many places will insure wine collections, but not spirits collections. I'm still trying to figure out if that has to do with the physical differences between the liquids or just that more people have been collecting wine for longer and there has been a market for underwriters to assess the risks of that type of insurance.

Even if there are companies that will provide whisk(e)y insurance, there are plenty of variables that lead me to wonder whether or not paying the annual premium is worth the coverage. What type of time and effort is required in terms of record keeping and valuation (e.g., excel spreadsheets, receipts, bunker pictures, etc.)? What type of loss coverage is generally provided -- replacement cost, actual cost or fair market value, agreed value or stated value? One could have an out of production whisk(e)y that breaks and the only value metric would be the secondary market or auction prices, but one could also have a 2014 PVW or BTAC type bottle that could be replaced at retail for $79.99, but we all know finding it at retail is not likely.

Of course, the bunker contents may constantly fluctuate depending on consumption and buying patterns.

I recently found the website whiskyinsurance.com. I think they have been in the wine insurance business and are just beginning a whisk(e)y insurance program. They have some FAQs on the website which are interesting. They appear to pay out, after considering various exclusions and caps, based upon fair market value. Without reading the actual policy, however, it is hard to know exactly what that would mean in practice. I'm sure there are other similar companies.

Does anybody here have bunker insurance or has anybody thought about this topic much? I'd appreciate the sharing of any thoughts, experiences, wisdom, etc.

Thanks.

[ldugsjr1986]

I really have nothing to contribute other than being interested and wanting notifications for when someone with some insight comments so ... following this one.

[Paddy]

My 2 cents...

Check your policy. Standard homeowners insurance policies cover everything, except what is specifically excluded. Most insurers homeowners policies are written off the standard ISO form, and therefore similar.

Depending on the cause of the loss, special limits can apply to items such as jewelry, furs, guns, silverware and such. Special limits can also apply "off premises", in case you are storing contents off site in a storage warehouse or friends garage. Special coverage limits and how/when they may apply to a loss are specifically stated in the policy (another great reason to read it).

My interpretation is that bourbon falls under the personal property/contents coverage and we are protected for covered perils. Personal property losses are settled at actual cash value and/or no more that the cost to replace said item. Therefore, insurers will resolve these losses at actual cash value. In other words, it your Pappy 15 bottle is 1/2 empty, you should not expect to receive more than 1/2 of the value of the bottle. However, should you actually be able to replace the bottle, the insurance company would then owe you the difference between the actual cash value and replacement cost value (which is usually referred to as the recoverable depreciation).

Lastly, if the item is no longer available, the insurance company owes you a reasonable and fair settlement for a like/kind/quality replacement. You should expect, nor settle, for less than reasonable and fair. Just do not expect the insurance company to pay secondary market pricing to replace a rare providence/vintage item. Most policies also address this in the policy settlement/conditions section.

[fishnbowljoe]

FWIW, I asked my insurance agent if I needed a rider, or separate policy to cover my bourbon collection. I explained what I had, and the approximate value. My agent told me that I was covered under the personal property clause of my policy.

Joe

[Underhilltab]

Thanks Paddy and Joe. I appreciate your replies. I also enjoy reading both of your frequent posts on the board.

I think it is correct that whiskey would generally be covered as personal property under a homeowners insurance policy. I think, however, the devil is in the details regarding whether or not a particular insurance policy would provide adequate coverage. Of course, whether or not one is comfortable with the type and amount of coverage likely depends on the person.

I think my bunker contents would be covered under my policy but, the question is, covered for what amount and for losses caused by what perils. There is usually a limit on coverage for personal property. That limit may be pretty high, but who knows what could happen. If there is a total loss to the dwelling/structure and the personal contents inside -- then that limit may not seem so high anymore. Also, what perils are covered is a key question. I have a standard policy with a very reputable company and I am pretty sure that my policy excludes losses caused by water damage/floods, earthquakes, neglect (which could be defined pretty broadly when an insurance company is trying to defend a claim), power failures (except for certain personal property in the refrigerator and even then there is a cap), weather conditions, and accidental breakage. Well, some of those things are the exact reason I would want insurance in the first place. The policy, I am pretty sure, covers losses caused by fire, lightning, windstorm, hail, explosion, riot, civil commotion, aircraft, smoke, vandalism, theft, falling objects (from outside the house), volcanic eruption, and some others -- but even those have certain carve-outs (most notably -- theft -- if, for example, there's a renter/tenant in the house or the house is undergoing construction).

I generally agree with Paddy's take on replacement value/actual cash value. I think the issue is how that applies to the currently crazy bourbon world. For example, that PVW15 may have cost you under $100. I just saw several, however, at retail stores in CA a few weeks ago for almost $1,000. Would the insurance company say the replacement cost is under $100 because it is still in production and that is the retail price or would the company recognize that most likely it would cost closer to $1,000 to replace in this market -- or somewhere in between? Forgetting what a standard policy says, what would you expect to recover? If you paid $1,000 for your bunker contents, but you know they are worth $10,000 in this market, do you expect to recover the $$ you originally invested, the amount you know people in this crazy market would pay for it at auction, or somewhere in between? What is also relevant is the track record and reputation of the insurance company. Some companies may have limited coverage, but they are wonderful during the claims process and pay out very fair and reasonable amounts. Other companies may have seemingly broad contractual language, but are pains during the claims and payment process.

I am probably thinking way too much about this topic. Some people probably don't care about insurance. Others are probably comfortable that their homeowners policy is sufficient. I just think, based on some experience, that I would not be happy with the result if my bunker shelves collapsed into a pool of broken glass and whiskey -- or somebody stole part of my bunker -- and I then made a claim under my homeowners policy. So, I am thinking about getting a separate and specific policy. Just thinking about it. I may end up doing nothing. I haven't found many companies that offer such a product. The kicker is that there is also a clause in my policy that states personal property is not covered if it is separately insured by another policy. That clause may be fairly common, but it means I don't want to go with a fly by night company that eventually gives me problems when called upon only to remember that I chose to forego the chance to recover anything under my homeowners insurance policy which may have limitations but, at least, is backed by an established and reliable company. None of this matters until it actually matters (if ever), but I figured I would give it some thought and check with some others.

Anyway, thanks all for reading, replying, and generally indulging me throughout this exercise.

[luther.r]

I've been through this with both vintage motorcycles and vintage musical instruments, and in both cases I ended up learning that I needed to get a policy that specifically covered "stated value."

Basically, when you open the policy, you say "my items are worth $x and you're going to cover that value if they're lost/damaged/stolen." Then the insurer charges you based on that rate, and if there's a loss they've committed to paying out at that value. Some stated value policies require an appraisal of the items, some don't.

[Underhilltab]

Yes, I've encountered stated value or agreed upon value policies when inquiring about insurance coverage for other types of collectibles as well. I don't know, however, if that type of policy is offered for whiskey. So far, I have not been able to find one.

[petrel800]

Coming from someone in the insurance industry, it would seem to me that any premium you spent beyond your homeowners policy (assuming you have read your policy and have adequate coverage for your home, contents and liability) to insure bourbon would probably be better spent on measures to secure your home from break in and on better storage for your collection. Securing your home and better storage will likely prevent 99% of losses to your collection. Beyond the basic stuff and theft, if a major event/storm/catastrophe rolls through my neighborhood, my last care in the world is going to be the bourbon in my basement. If I survive intact with my family and dog, then you could give me standard Makers and I'm going to be just fine. Just my 2 cents.

[Underhilltab]

if a major event/storm/catastrophe rolls through my neighborhood, my last care in the world is going to be the bourbon in my basement. If I survive intact with my family and dog, then you could give me standard Makers and I'm going to be just fine. Just my 2 cents.

I certainly wouldn't care about any material items in a life/death situation either. Thanks for your general comments Petrel800. I hadn't read my homeowners insurance policy in a long while, so I really began this as a bit of a curiosity exercise. As I read the policy and spoke to the company a couple of times, I realized that there may be some gaps between what homeowners insurance covers and what a specific collectible policy may cover (even aside from the catastrophic events). For instance, a collectible policy might cover unauthorized consumption, authentication coverage (in the event you purchase fraudulent/counterfeit whiskey), accidental breakage (shelves falling), transit damage, etc. You may be right, though, that the annual premium $$ may be better spent on better storage and security. Based on Murphy's Law, I wouldn't be surprised if I secured a specific policy and my bottles were later damaged or otherwise affected by something not covered by homeowners or the specific policy!

I found one company that provides specific whiskey insurance. They just started binding policies in 2015, but they've been in the insurance biz for years and have apparently offered wine insurance for many years. I have been reviewing the template contract (which I have been told I cannot negotiate). They base claims settlement on FMV -- basically defined to be at the sole determination of one gentleman who is supposedly well known in the whisk(e)y industry -- although I had never heard of him (which isn't saying too much). I found that definition to be potentially problematic (for me).

[SebastianLloyd]

Do you log your bourbon that you have in your bunker, like where you got the bottle, name, price, batch, how many...?

I also got insurance on my collection a few months ago just in case of an earthquake or fire, for $2 more a month it covers up to $5000.

Edited January 17, 2016 by SebastianLloyd
Changed from topic questions to reply to existing topic.

[b1gcountry]

I bought an insurance policy at my bank. It was a one time flat fee of $500 with no fees, and covers all the whiskey I own. It pays out instantly whenever I make a claim, covers any item in my house that breaks other than whiskey, and I can cancel it anytime I want for a full refund.

Whiskey is a luxury good, and should be treated as such. You should not sink a single dollar into whiskey that you wouldn't be comfortable losing