Safe deposit boxes

Safe-deposit boxes are, as their name implies, a pretty safe place to store your valuables. But there are some things you should know before entrusting your valuables to one.

How they work

A safe-deposit box is a long, narrow box held in a secured area of a bank that customers lease, typically a year at a time. Boxes usually have two keyholes: one for your key and one for a guard key. Before bank personnel will help you open a safe-deposit box, they’ll most likely verify your identity in some way, such as by comparing your signature to one they have on file.

What to put and what not to put in a safe-deposit box

A good rule of thumb is, if you might need to access the item outside of bankers’ hours, it should probably stay in your home, says Luke W. Reynolds, chief of outreach and program development at the Federal Deposit Insurance Corp., or FDIC.

Safe-deposit boxes are also not a great place for items such as power of attorney documentation or a will, which loved ones might need if something happens to you, Reynolds says.

“It may not be possible for your loved one to access them quickly if you become incapacitated or pass away,” Reynolds says.

Security upgrade

Safe-deposit boxes are generally a big upgrade, security-wise, over a home safe. Even expensive, hard-to-crack home safes can be defeated by breaking into a home and forcing the owner to open them. If no one’s home, criminals who can’t crack a safe’s lock have been known to remove the entire safe and take it to a remote location to open.

In contrast, a safety-deposit box is typically held inside a bank vault and protected by many of the security measures that banks deploy to keep their own cash reserves safe, Reynolds says.

“A safe-deposit box has certain protections that would be much more secure than a home safe,” Reynolds says. “Regulators require banks to have certain minimum security procedures.”

So, even if a thief is able to crack the lock on an individual safe-deposit box, he’d have to break through the bank’s other security layers to do it.

Disaster protection

One of the biggest reasons that people use safe-deposit boxes is to protect them from fires and natural disaster, says Chris Cole, executive vice president and senior regulatory counsel at Independent Community Bankers of America.

Cole says safe-deposit boxes generally do a good job of protecting documents from the elements. In his more than 30 years of experience working in the banking industry, he can recall only a couple of occasions when safe-deposit boxes were compromised. The culprit: floods.

“The vault usually is strong enough to withstand high winds and even tornadoes, but it’s water that is really what you can’t always be sure about,” he says.

Reynolds agrees. Flood water from disasters like Hurricane Katrina can mean extensive damage to pictures, documents or other valuables held within safe-deposit boxes, he says.

“We really encourage consumers to take precautions such as protecting against water damage by placing items in plastic containers or Ziploc bags,” Reynolds says.

Insurance incomplete

In the event that a bank branch with your safe-deposit box in it is destroyed, don’t expect the bank’s insurance policies to cover your belongings. Many banks specifically say in their safe-deposit box agreements that their insurance doesn’t cover your stuff.

FDIC insurance also doesn’t cover the contents of safe-deposit boxes, Reynolds says. If you want your cash to be protected from disaster, you’re going to need to deposit it in an actual account, he says.

“If consumers want protection for the valuables in their safe-deposit box, they should talk to their insurance agent for options of what might be available,” Reynolds says.

However, the FDIC does provide protection to safe-deposit box renters. When it takes over a failed bank, it makes sure customers regain access to their boxes by the first business day after the takeover.

Know the ‘drill’

There are a few circumstances in which a bank will drill out the locks to your safe-deposit box and go through the contents, says Cole of the ICBA.

  • Unpaid rent. Like an apartment lease, if lessees don’t pay, they get evicted. Customers can usually come and claim the contents, provided they pay past-due rent and any costs associated with drilling out the lock.
  • Court order. A judge can order a safe-deposit box drilled and the contents turned over to the court or some other party.
  • Unclaimed property. If the bank loses track of you because you’ve moved or because of some other reason, state laws may require the bank to drill out the box and send the contents to your state’s unclaimed property office.

Your bank may have some other terms governing how and when valuables can be accessed, Reynolds says. The key thing is taking a good look at the bank’s terms and conditions before you entrust it with your valuables.

“A consumer should review the safe-deposit-box contract they have with the institutions for their rights and responsibilities,” Reynolds says.