The Hidden Costs of Wine Investing: Storage, Insurance, and Fees

Did you know that, beyond being a collectable find for enthusiasts, fine wine is also considered an investable asset? There’s certainly some appeal to investing in such a prestigious and timeless commodity—not to mention, its value doesn’t waver in accordance with stock market movements. In fact, fine wine has a history of strong performance, being one of the few luxury items that tends to appreciate with age.

This isn’t to say you should shift your investment strategy to incorporate fine wine—particularly if you aren’t a passionate wine enthusiast. The reality is that fine wine as an investment is complicated, thanks in no small part to the hidden costs that eat away at profits. Let’s take a closer look at what goes into collecting and storing fine wine and the costs associated with maintaining this type of investment.

Storage: Protecting the Value of Your Wine

If you’ve ever ordered wine at an upscale restaurant, you’ve probably experienced the usual pomp and circumstance that comes with it. A waiter uncorks the bottle, pours a small amount in your glass, and asks you to taste and determine if it’s up to your standards. 

Restaurants do this because wine can go bad, and for many reasons (namely oxidation or cork taint). In fact, storing fine wine properly involves more science than most people realize. Even bottles kept under textbook conditions can experience decay or damage—though the better the storage conditions, the less likely this is to occur.

According to Lisa Eppel, a WSET level 3 certified sommelier, extreme cold or heat can cause damage to wine. “For long-term storage, all wines should be stored in a dark place around 55°F or 13°C with about 60-70% humidity,” she said.

Beyond temperature and humidity, the wine bottle’s position can also impact its longevity. Eppel explained: “Wine that is sealed with a cork should be stored on its side to ensure the cork remains in contact with the wine. The proper storage temperature, as well as storing the bottle on its side, will protect the cork from drying out.”

Typical Wine Storage Costs Per Case

Novice collectors who aren’t considering their wine a serious investment (or those who plan on enjoying it sooner rather than later) may use an at-home wine cellar or fridge. Some self-storage spaces may even offer humidity and temperature-controlled space to house bottles.

However, Eppel said many collectors use professional wine storage facilities to ensure optimal conditions.

There are a few different types of professional storage facilities. A standard facility might have an average cost of $3 to $8 per case annually, along with monthly maintenance fees (these can be upwards of $100 a month).

A premium facility will charge more. These are more commonly used for high-value or rare collectibles and boast an average fee of $8 to $20 per case, with additional monthly maintenance or concierge service costs closer to $200 a month. Concierges at premium facilities can help facilitate trades between buyers and sellers. 

Risks of Improper Storage

“Light and vibration are enemies of wine; both can degrade its quality over time,” explained Eppel.

When fine wine is stored improperly, especially over a long period (years or decades), its drinkability and value can be destroyed.

“Heat damage leads to cooked flavors, while dried corks allow oxidation and spoilage,” she said. “A bottle with seepage, low fill levels, or label damage can be worth a fraction of the same wine in perfect condition.”

Insurance: Safeguarding Against the Unexpected

While most investments don’t come with an insurance policy, collectables like fine wine can be insured. Keep in mind, those insurance premiums will ultimately reduce the total return on your investment (alongside the storage fees and any additional fees to purchase and transport the wine). 

Once a bottle or case has been purchased, it will likely need to be transported to the investor’s storage facility. Eppel explained: “Valuable bottles of wine are typically shipped via specialized logistics firms that use temperature-controlled shipping and shock-absorbing packaging.”

Regarding protection during transport, she noted, “Breakage is rare when using professionals, but bottles are usually insured for full market value.” This is called “in-transit insurance,” which only offers protection during transit. 

What Does a Fine Wine Insurance Policy Cover?

It’s not unusual for wine storage facilities to charge insurance fees for storing the bottles on the premises. This fee averages between $1 and $3 per $1,000 in value.

If you opt out of the facility’s insurance offerings, check with your homeowner’s policy. Your valuables may be protected up to the coverage limit. But for high-value wines or extensive collections, a traditional homeowners insurance policy likely won’t provide adequate coverage. 

If you do opt for a specific wine insurance policy, you may be able to choose between a blanket coverage policy or a scheduled coverage policy. A blanket coverage policy offers an overall, flat coverage option for all bottles in the collection. A scheduled coverage policy is more complex, as it provides coverage on a more itemized or individual basis, based on the value of each bottle of wine.

Usually, fine wine insurance will cover risks including:

• Theft
• Damage during transportation
• Temperature-related damage (say there’s an equipment malfunction or power outage)
• Handling mistakes, which may cause a bottle to break
• Some facility disasters (fire, flood damage, etc.)

Generally speaking, wine insurance coverage no longer applies once a bottle has been opened. 

Fees and Transaction Costs

Aside from purchasing the wine itself and storing it properly, you’ll also need to consider any associated fees or transaction costs.

Ian Weiner, CFP, CEPA, owner of Bespoke Wealth Solutions, explained that purchasing wine from an auction house incurs additional costs, often as high as 18% to 25% of the final sale price. “There are often fees for selling at auction. While all of these vary and can be negotiated, they shouldn’t be overlooked,” he cautioned investors.

Taxes on Fine Wine

According to Weiner, wine and spirits are taxed as collectibles, with potentially higher top capital gains rates than stocks, bonds, and other traditional securities. Under current rules, the top capital gains rate for collectibles is 28%, making them relatively tax-inefficient compared to other investments. For reference, long-term capital gains tax on investment income and qualifying dividends tops out at 20%. 

“Starting with the end in mind on alternative assets is critical, because we need to know what our exit strategy is,” explained Weiner. 

In addition to a collectible tax, fine wine purchased overseas may be subject to value added tax (VAT). “There can be taxes (VAT) assessed at the time of purchase, shipping costs to the storage location, and fees to store and insure your purchases. Collectors will often store wine at bonded warehouses in the UK, which allows for some deferral of VAT,” said Weiner.

How These Costs Impact Returns

While a few dollars per bottle or case may not sound like much, the costs can add up over the years—and when wine is considered an investment, it’s not unusual for an investor to hold onto certain bottles for a prolonged period.

Spread across many cases and years, the cost to insure and store (and eventually offload) wine eats into final profits.

“When calculating the performance of any investment, the fees and costs to acquire, hold (including ongoing maintenance), and sell the asset should be considered. Hidden costs can reduce total returns on all types of investments, not just expense ratios in mutual funds or ETFs, or commissions for trading stocks or bonds,” said Weiner. “Wine and premium spirits are no different; there are significant costs and potential risks with owning these assets as investments.”

The Bottom Line

“Wine and spirits are passion investments,” said Weiner. “The purpose of owning them is inherent in the purchase, so other factors like tax and costs may be less important than the perceived value of owning something historic or rare.” 

If you’re considering incorporating fine wine into your portfolio, consider the costs associated with purchasing, transporting, protecting, and storing your cases or bottles. Yes, fine wine can become more valuable with age, but the costs of keeping it in pristine, sellable condition will rise as well.