What is Safe Deposit Box
A safe deposit box is usually located inside a bank and is used to store valuables. A financial institution rents out safe deposit boxes, and they can be accessed with keys, pin numbers or some other type of security pass. Valuables, such as documents and jewelry are placed inside, and customers rely on the security of the building and vault to protect those valuables.
BREAKING DOWN Safe Deposit Box
The contents of a safe deposit box are not insured in the same way as bank deposits. The Federal Deposit Insurance Corporation 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.
If a safe deposit box renter wants insurance on the items within the safe deposit box, they'll need to purchase it on their own. It's worth considering because disasters can strike bank vaults, too. A safe deposit box customer may consider a special policy rider for their home or renter's insurance policy to specifically cover those valuable items kept in the box. Insurers will often give a discount for storing high-value items in a safe deposit box. A few insurance companies specialize in policies for safe-deposit box contents.
Some institutions will allow you to set up access, so both (or all) lessors have to be present to open it, but this sort of arrangement is not smart or practical. Instead, experts recommend having a designated power of attorney, who can access your safe deposit box in case you can't.
Banks used to freeze access to safe deposit boxes when a box renter died, pending instructions from a court, but this doesn't happen much anymore. Before your rent a safe deposit box, it's important to ask the institution what their process is in case of death. If you alone rent the box, the box will be sealed when you die, and it could be weeks or months before it’s opened. An executor that you designated to handle your estate after you die would eventually get access to your safe-deposit box, but how quickly depends on the state and the bank.
Why Rent a Safe Deposit Box
A safe deposit box is a good place to store anything valuable you don't need to regularly access. Appropriate items for a safe-deposit box include:
- Personal papers.
- Stamp or coin collections.
- Jewelry or rare collectibles.
- Important contracts and business papers.
You should not store items you might need on short notice or in an emergency. This includes passports, medical directives or durable powers of attorney, health care proxies and revocable living wills.