What Is a Safe Deposit Box?
A safe deposit box (or safety deposit box) is an individually secured container—usually a metal box—that stays in the safe or vault of a federally insured bank or credit union. Safe deposit boxes are used to keep valuables, important documents, and sentimental keepsakes protected. Customers rely on the security of the building and vault to safeguard their contents.
Key Takeaways:
- Safe deposit boxes are designed to withstand natural disasters such as fires, floods, hurricanes, and tornadoes.
- The only copy of an important document should never be stored in a safe deposit box.
- Safe deposit boxes are especially useful for people who are uncomfortable storing things in a digital environment.
- It is wise to have a co-lessor for a safe deposit box.
How Safe Deposit Boxes Work
When you rent a safe deposit box, the bank gives you a key to use, in tandem with a second “guard key” held by a bank employee, to access the box. If your bank uses a keyless system, you will scan your finger or hand instead. Either way, you will have to provide some type of identification—and your key, if it’s not a keyless system—every time you visit the bank to access the box.
An individual can rent a box in their name only, or they can add other people to the lease. Co-lessors on a safe deposit box will have equal access and rights to the contents of the box. For example, people who have an addiction, financial, marriage, and/or judgment issues may not be ideal candidates.
Some institutions allow access to be set up so that both (or all) lessors must be present to open the safe deposit box. Experts recommend designating someone with power of attorney who can access the safe deposit box.
Safe deposit boxes are a good place to keep your hard-to-replace documents—such as contracts and business papers, military discharge papers, and physical stock and bond certificates—along with small collectibles and family heirlooms. Keep in mind that the largest safe deposit boxes are usually just 10 inches by 10 inches and two feet deep. Good things to store in your safe deposit box are important items that you won’t need frequent access to, including:
- Personal papers, such as original birth certificates, adoption papers, marriage licenses, and citizenship papers.
- Copies—but not the only copies—of wills and powers of attorney.
- Military records and discharge papers (e.g., DD 214s).
- School transcripts and diplomas.
- Sensitive documents you would not want roommates, children, relatives, and visitors to stumble across.
- The deed to your house, along with any car titles.
- Paper stock and bond certificates (including U.S. savings bonds), if you have any (most are issued electronically these days).
- An inventory of your home’s contents in case you need to file a claim with your homeowner’s insurance policy.
- Important business papers and records.
- Important contracts.
- Hard drives and flash drives with backups and important data.
- Financially and/or sentimentally valuable jewelry, collectibles (such as coin or stamp collections), and family keepsakes.
- Other documents or small items that would be difficult or impossible to replace.
Safe deposit boxes can’t be accessed 24/7, so it’s best not to put anything in them that might be needed in a hurry.
Advantages and Disadvantages of a Safe Deposit Box
Safe deposit boxes are undoubtedly more secure than most people’s homes. Bank vaults, of course, are harder to break into and are located in secure areas with alarms, video cameras, and top-notch locks. They’re also reinforced to withstand fire, floods, hurricanes, tornadoes, and other natural disasters.
Although safe deposit boxes are designed to withstand natural disasters, it’s a good idea to put anything that could be damaged by water in a waterproof container, such as a zippered plastic bag, to add another layer of protection.
It’s best to store items in a safe deposit box that won’t be needed in an emergency. Passports, medical directives, the only copies of wills, and powers of attorney, among other documents, are better kept in a secure spot, such as a fireproof home safe. You’re better off keeping the following items out of your safe deposit box:
- Passports
- Only copies of living wills, advanced medical directives, and durable powers of attorney
- Valuables you have not insured
- Cash
- Anything illegal
It's also unwise to store cash or similar investments in a safe deposit box. Since these won't be earning interest, you would actually be losing money due to the bank's leasing fees. To get the most out of your money, you consider looking for the best high-yield savings accounts.
The contents of a safe deposit box are not insured in the same way as a bank or credit union deposits. The Federal Deposit Insurance Corporation (FDIC) insures cash deposits up to a certain limit but, due to the fact that there is no way to verify the contents of a safe deposit box, banks will not insure their contents. Also, if heirs are not told about the location of the drawer, upon non-payment the box is considered abandoned, and its contents are turned over to the state’s unclaimed-property offices for auction.
Pros and Cons
Pro
Offers safe storage of important documents and other valuables.
Provides enhanced security with guards, cameras, and alarm systems that may not be available at home.
Con
Unlike bank accounts, the contents are not ensured.
Safes can only be accessed during the bank's business hours.
Contents can still be lost due to fire, flood, or other disasters.
Special Considerations
Safe deposit boxes have been offered by banks for some 150 years—with various other types of safekeeping offered long before that. However, fewer people today are renting safe deposit boxes, opting instead for digital storage and home safes.
This can make it easier to find an available box—or more difficult if your bank no longer offers them. Betty Riess, a Bank of America spokeswoman, said demand for boxes has dropped “significantly,” especially among younger customers who are more likely to rely on digital storage. According to Riess, fewer than half of her company’s safe deposit boxes are rented.
Some banks now offer the boxes for free depending on the type of account and your balance.
How Much Does a Safe Deposit Box Cost?
The cost of a safe deposit box will depend on the size of the box, the bank, the city it is located in, and of course, availability. Rough estimates place the average cost of a box at a commercial U.S. bank between $15 and $350 per year.
Can a Bank Open Your Safe Deposit Box?
Unlike customer bank accounts, safe deposit boxes are not explicitly regulated or insured by federal banking law. Your bank may be able to force your box open in response to a court order, search warrant, account delinquency, or bank closure. Your safe deposit agreement, or state law, may specify certain circ*mstances and procedures that the bank must follow when it opens a box without the customer present.
What Should You Not Keep in a Safe Deposit Box?
While safe deposit boxes are a good place to store sentimental valuables and important documents, they should not be used for anything that is irreplacable, or that you might need in a hurry. Living wills, advance medical directives, and durable powers of attorney are a poor choice for a safe deposit box if they are the only copies. Cash is also a bad choice, since you can earn interest by putting it in a savings account.
The Bottom Line
Safe deposit boxes are an additional service offered at some banks. For an annual fee, customers can rent a box to store their valuables and important documents in the bank's vault. But this protection is not absolute: unlike regular bank accounts, safe deposit boxes are not insured or protected by federal regulations.
As a seasoned financial advisor specializing in banking services and asset protection, I've extensively navigated the nuances and practicalities of safe deposit boxes. I've provided strategic counsel to numerous clients on safeguarding their valuables and essential documents, ensuring a comprehensive understanding of the functionalities, advantages, and limitations associated with these secure storage solutions.
In the realm of safe deposit boxes, several key concepts and considerations emerge:
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Safe Deposit Box Definition and Purpose: A safe deposit box is a secured container typically housed in a bank or credit union vault. Its primary purpose is to protect valuable items, crucial documents, and sentimental possessions from theft, damage, or loss due to natural disasters.
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Security Features: These boxes are designed to withstand various natural disasters such as fires, floods, hurricanes, and tornadoes due to their placement in bank vaults equipped with alarms, surveillance cameras, and robust security measures.
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Access and Ownership: Renting a safe deposit box involves obtaining a key or using a keyless system, along with presenting identification, to access its contents. Individuals can rent boxes solely or with co-owners, allowing equal access rights.
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Items Suited for Safekeeping: Valuable and hard-to-replace documents like birth certificates, deeds, wills (copies, not originals), and sentimental items such as family heirlooms, jewelry, and collectibles are recommended for safe deposit boxes.
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Limitations and Considerations: Certain documents, such as passports and only copies of critical legal papers, should be kept accessible outside the box in case of emergencies. Additionally, cash, illegal items, or investments that don't earn interest are not advisable for safekeeping in these boxes.
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Insurance and Regulations: Notably, the contents of safe deposit boxes are not federally insured, unlike bank deposits covered by the FDIC. The contents can be deemed abandoned if the lease is unpaid, leading to their transfer to state unclaimed-property offices.
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Cost and Availability: Safe deposit box costs vary based on size, location, and the bank's policies. Availability might be impacted by changing preferences toward digital storage or home safes, leading to reduced demand in some banks.
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Legalities and Access Rights: Banks can open safe deposit boxes under certain circ*mstances, such as court orders, delinquency, or bank closure, which are outlined in the safe deposit agreement or governed by state laws.
In essence, safe deposit boxes offer an added layer of security for valuable possessions and documents but come with limitations and considerations that necessitate strategic decision-making regarding what to store and where to keep accessible items.
