The Not-Very-Safe Deposit Box
Your safe deposit box is likely the repository for your valuable gems, jewelry, coins and even, cash. A safe deposit box at your local bank is a surefire way to protect your valuables and family heirlooms, right?
The Federal Deposit Insurance Corporation (FDIC), the stalwart for consumer confidence in the banking industry, insures your deposited (cash) funds in your checking and savings accounts up to $250,000. They DO NOT claim any coverage for the contents of a depositor’s safe contents!
If you walk into your bank branch and deposit $250 into a checking account, and $125,000 of jewelry into a safe deposit box, I bet that you’d feel like your assets are pretty safe. But that feeling of safety is baseless. Should that bank or its contents suffer a loss or hazard, the only thing you’ll get back is your $250. Although there are more than 5,000 bank robberies each year, only about 12 per year target a bank’s deposit safe. Most “lost” deposit box claims are caused by mundane mismanagement of the boxes due to branch closure, conglomeration, or renovation.
There are no federal laws governing the maintenance or the loss of safe deposit boxes. There is no legally-structured mechanism of recourse for safe deposit tenants to reclaim the value of their deposits if they are lost, stolen, misplaced, destroyed, or damaged. As suggested in a recent New York Times article, your bank will fight tooth-and-nail to sink your claim to lost deposits. To read this article, click here.
Some states have laws which require banks to notify safe deposit tenants when their box is going to be moved, or the controlling bank is closing or being transferred or bought out. Most states have no such regulations. The states that do, like New Jersey, don’t always enforce them. If you hold valuables in a safe deposit box, you should do two things immediately:
Get an insurance appraisal: Pull everything out of the safe deposit box and have it appraised by a certified and accredited appraiser. If your safe deposits are focused on any single asset class, like jewelry or coins, make sure to get the appropriate specialist. Appraisers are used to working in the bank’s private room with you, and your items present. The money you spend on this insurance appraisal could end up saving your deposits, so you will not want to skimp on the quality, cost, or extent of the work. For more information about what makes a qualified appraisal, look here.
Add the deposited items to an insurance policy: Your existing homeowner’s insurance policy might cover this, OR you may be required to buy a special “safe depositor” policy. Either way, this is money well spent considering the ratio of value-to-risk.
Co-authored by: Lynn Magnusson, ASA, AAA , and Kollin Handler, Communications Director