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Banking 101: Safe Deposit Box: How it Works And Where to Get One Near You

Written by Chris O’Shea | Published on January 22, 2020

Note: This article is part of our Basic Banking series, designed to provide new savers with the key skills to save smarter.

A safe deposit box is a private and secure place to keep your valuables, and you can find one for rent at most local banks near you. If you have family heirlooms, important documents or other precious items that need an extra layer of protection, a safe deposit box could be a great option. Here’s what you need to know about using a safe deposit box, as well as some alternatives to consider.

In this article we will cover:

What is a safe deposit box?

A safe deposit box, also referred to as a safety deposit box, is a small secured space in a larger vault inside of a bank or credit union branch. Think of these as a smaller version of a safe, which you can rent to store valuables and important documents.

There are different sized safe deposit boxes available, with options depending on your bank of choice. Typically, the smallest box is around 3" x 5" x 24” (imagine a larger version of a mailbox), while the largest options are typically around 10” x 10” x 24” (the size of a small school locker).

Not every bank or credit union branch will offer a full range of sizes, and your options will depend on what a given branch has available. It’s always a good idea to call around and check to see what’s available in your area.

Why use a safe deposit box?

As the name implies, the big advantage of a safe deposit box is security. A safe deposit box at a financial institution is stored inside a thick vault, reinforced with concrete and steel walls. There’s also the added protection of the bank or credit union’s security system, which is monitored around the clock.

What to put in a safe deposit box

Generally speaking, a safe deposit box is good for storing valuable items that you won’t need to access on short notice. Your local bank or credit union should be able to help you figure out what items can be kept in a safe deposit box.

Items that are acceptable to put in a safe deposit box include:

  • Originals of important documents like birth certificates and property deeds
  • Jewelry
  • Family heirlooms or keepsakes
  • Documentation for insurance purposes

What not to put in a safe deposit box

Even though safe deposit boxes are used to safeguard items that are valuable, that doesn’t mean that every important document should go into one. That’s because you can only access the box during your bank’s regular business hours. Here are some items that shouldn't go in your safe deposit box:

  • Cash: Cash is typically not recommended because the contents of a safe deposit box are not FDIC-insured. Just because it’s stored at the bank doesn’t mean that it’s considered the same as a deposit account. If you want to store cash, it’s better to stick it in a bank account where you can access it easily.
  • Your will and power of attorney: Documents that you may need on an unpredictable basis, such as a will or power of attorney papers, should not be stashed in a safe box either. For these types of documents, it’s best to check with an attorney on where to best store these types of original documents based on laws in your state. An estate attorney, for example, can keep important documents on hand for you and your loved ones. You can also keep backups on flash drives, portable hard drives or cloud-based storage services like Google Docs or Dropbox.
  • Your passport and other IDs: Unless you’re James Bond in need of a quick disguise, most folks don’t really need to keep IDs in a safe deposit box. You may need to access these items often, so storing them where you can’t get to them easily isn’t the best choice.

How much does a safe deposit box cost?

The average cost of a safe deposit box can range from $20 per year all the way up to $200, depending on the size of the box. Some banks offer a discount for those who make automatic payments or have a premium checking account. Some major banks even provide a free small safe deposit box with their premier accounts.

Private bank vault companies are an alternative to banks. Many of these companies claim to have state-of-the-art security, such as steel-reinforced walls and motion sensors. However, private safe deposit box vault companies tend to be more expensive than banks. Prices usually start at a few hundred dollars a year for a small box.

How to get a safety deposit box

You can get a safety deposit box at your local bank or credit union. When visiting a branch, the bank manager or a teller would be able to let you know about the sizes available and pricing, including any discounts you may qualify for. It might be a good idea to either bring the items you intend on storing or gather the items in your home to estimate the size of box you’ll need.

Once you determine what you want and its availability, you’ll be asked to sign a lease agreement and identify who has access to the box. You’ll then be given one or two keys, and the bank will keep a key on the premises as well.

The process for getting a safe deposit box through a private company is similar, except that you may be able to reserve a box online and then complete the rental process in person.

Safe deposit box insurance

Money kept in a safe deposit box is not covered by FDIC or NCUA deposit insurance. These organizations only insure money held in regular bank accounts.

However, there may be partial compensation if your box or the contents inside it were to be damaged or destroyed. Each bank has its own policies, so check the fine print in your rental agreement to see if your items are insured.

Private bank vault companies, on the other hand, often provide insurance for their safety deposit box customers. Most will insure up to $5,000 worth of contents, and for a small fee, you can increase the coverage. When renting a box, you can choose how much coverage you want and the company will issue a policy in your name.

If you’d like to add insurance to your safe deposit box, here are two available options.

Option 1: A rider to homeowners or rental insurance

If you’re worried about the items in your safe deposit box becoming damaged, you'll need to purchase insurance for it separately. You can do this by adding a rider, or additional policy, to your homeowners or rental insurance. Your agent can guide you through the process of purchasing a personal property floater.

This type of insurance covers valuables that can be moved easily (hence the name), like jewelry and important documents. To get these items approved, you’ll most likely need to get proof of the item’s value, such as a recent receipt or a professional appraisal, and provide this proof to your insurance company.

Before you start documenting, check with your insurance company to see what it asks for in terms of specific reimbursement requirements. That way, you can make sure to write down all of the necessary details and take photographs to provide ample evidence. Your insurance company may provide tools, like the AllState Digital Locker, to help you.

To decide which option is best for you, assess how much the items are worth in the first place. If you’re not sure, it doesn’t hurt to take them to an appraiser to find out. If the combined value of these items are worth more than the limit in your standard property protection, then you’ll want to consider the add-on.

You’ll also want to consider in your policy whether you want to insure your possessions for replacement cost or actual cash value. The best way to figure out what’s best for your needs is to talk to an insurance agent about your current coverage and situation.

Option 2: An insurance policy specifically for safe deposit boxes

Your bank may have partnered up with a company called Safe Deposit Box Insurance Coverage as an extra option to insure your valuables. This type of insurance will cover all contents up to the coverage limit you chose. This includes precious metals, jewelry, cash, bank notes, coins, collectibles and even legal documents. Unlike homeowners insurance, you’ll be covered for flood damage. You’ll also be insured against natural disasters, such as landslides, earthquakes, tornadoes and hurricanes.

Another advantage to taking out a policy with Safe Deposit Box Insurance Coverage is that your documents are insured in case of damage or theft; homeowners and renters insurance does not have such coverage. The Safe Deposit Box Insurance Coverage policy covers up to $3,000 for documents such as deeds, wills and titles. The money is intended to go toward getting replacements for them. Since the policy covers what’s physically in the box, you don’t need to provide a list of contents or get items appraised. In other words, you can add in extra items and those will be covered by your policy in case of loss, theft or damage.

Depending on your situation and how much your items are worth, it may be cheaper to take out safe deposit box insurance instead of adding on a separate policy through your homeowners or renters insurance.

Designating access to your safe deposit box

In case you can’t physically get to your safe deposit box, it might be a good idea to designate access to someone else. If you’re the only owner, it may be difficult for heirs or other family members to get access to your possessions. This is especially true if you didn’t tell anyone about the box or keep records of its whereabouts or contents.

However, you can’t just give privileges to someone and remain the sole owner of the box. Banks and credit unions often don’t allow you to assign limited privileges of access to your safe deposit box. The only alternative is specifying another authorized person, where the person would have full access to your safe deposit box.

Thus, it’s a good idea to ensure that whoever has access to the box is someone you trust. You don’t want to find out the person you gave access to went in without your knowledge. Banks can’t deny access to a safe deposit box to an authorized person. While they may keep records of who accessed the box, they don’t know who is the actual owner of its contents.

If you do decide to have a co-authorized person for your box, it’s a good idea to find a trusted family member first. Someone like your spouse or a child would be best because you have a closer relationship to those people. With anyone you designate, keep the lines of communication open so you can make sure they understand your wishes or you can contact them at a moment’s notice if you need access to your contents. In any case, keep detailed records of the box’s contents, the bank’s contact information and the box number you rented.

Accessing safe deposit boxes in the event of death

If you pass away and a family member wants to get access to your safe deposit box, the bank will need that person to provide documentation like a death certificate or court appointment as executor. This could take some time and may be a hassle for those involved, especially if you’ve had the box for some time. It could be that the bank you rented the safe deposit box from classified the account as closed. If that’s the case, the property would have been transferred to the unclaimed property in your last state of residence.

If there are items you want to make sure someone can get to, it’s better to be safe than sorry to grant someone permission to access your safe deposit box.

Alternatives to safe deposit boxes

If you’re not sure whether to keep important items or valuables in a safe deposit box, there are alternatives. Of course, with each option, there are pros and cons.

Home safe

This option can range from tens of dollars to hundreds, depending on the size and strength of the home safe. You can choose from different features, such as having a safe installed and affixed to a wall or getting one that has electronic entry, entry via a key or a mechanical entry lock. Some safes even go so far as to have biometric access where you must scan your fingerprint to open your safe.

The advantage of a home safe is that you can access its contents 24/7, so you can even store items that you may need frequent access to, like your passport or IDs. Home safes can be customized to any size you want, unlike safe deposit boxes at banks. This is good for those who want to store large items or have many valuables they want to keep safe. Most home safes are also fireproof, waterproof and, in some cases, smokeproof, helping to protect your valuables. Because they can be large or affixed to a wall, they could be safer because it would be difficult for burglars to remove and break into them later.

However, because they are hard to remove, home safes may not be as convenient as other options mentioned below. If there is a fire or another type of situation where you need to evacuate, you may not be able to remove the safe’s contents in time. You’re also responsible for making sure you or a trusted person can access your safe. For instance, if you misplace the keys, it could be difficult getting access. If you have a biometric safe and that’s the only option to open it, that could pose a problem in the event of your death.

Fireproof/waterproof safe deposit box

This option is similar to a home safe, but is smaller in size. These boxes also tend to be lighter, meaning they may not be made of thicker or sturdier materials, as compared to home safes. You can access its contents using biometrics, a key or electronic entry, much like a home safe.

The advantage to this type of box is that it’s portable, meaning you can place it anywhere for safekeeping or remove it from your home at a moment’s notice. They come in various sizes and you can use them to store smaller valuables. Because of its portability, thieves can remove them and break into the boxes at another location.

Diversion box

Also referred to as a diversion safe, these boxes are meant to be disguised as an everyday object in the house. The idea behind them is that thieves won’t know that there are valuables stored inside a “book” or a “clock” and move on. These boxes are meant to store smaller items or a stash of cash in case of emergencies. They’re much more inexpensive compared to home safes and safe deposit boxes, if cost is a concern for you.

Since they’re not as big as safes or even safe deposit boxes, they’re not going to help you with storing multiple items or even important documents. Furthermore, these items aren’t as sturdy as the aforementioned options since they’re most likely constructed from wood, thin metal or even cardboard. This also means that these items most likely will be destroyed or severely damaged in the event of a fire or flood.

  |     |   Comment #1
First, if you need all those insurance riders, policies and extra payments just to recover a partial part of the original value, why bother.
Second, if a bank can not guarantee the content of your box, why pay them for the box and an extra insurance.
Third, when a rogue employee finds out that you carry extra insurance on a certain bank box, you divert immediate attention to that box and the box number can be attacked from inside job(s).
Fourth, there are fire safes you can by for a $100 for your documents an store it at home. Also, there are almost full proof safes for your valuables that can be encased in concrete slab with no chance to be opened without a digital password or USB key (there are no hinges or combination locks exposed for tempering), they are even bomb proof.
  |     |   Comment #2
The safes that get "encased in concrete slab" are presumably floor safes (designed to be embedded in a concrete floor), which are at risk of water intrusion.

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