Safe deposit boxes: how safe are they?

Of course, your valuables are secure in a safe deposit box. You’re not in a movie. There is no complex heist being planned in a basement somewhere that will see you stripped of your goods. However, according to an investigative report published in The New York Times in July of 2019, burglary may be the least of your worries.

The report describes the experience of Philip Poniz, a man who opened a safe deposit box in 1983 in New Jersey with the First National State Bank of Edison. The bank changed hands several times across the decades that Poniz held his goods there and in 2014, he estimated that the items secured in his safe deposit box were worth an astonishing $10 million. However, when he turned up to what was now Wells Fargo to look in his box…there was nothing in it.

Poniz’s safe deposit box was completely empty and he soon found out that he could not rely on any federal protections to recoup his losses. Moreover, the bank engaged its immense legal fund to ensure his case would be tied up in the courts for years.

This may seem as unbelievable a situation as a heist movie plot full of lasers, assumed identities and even magic, but it is all too possible. Below are the key pitfalls of safe deposit boxes and why they may not be as safe as many of us think.

The differences between bank accounts and safe deposit boxes

As safe deposit boxes are in and provided by banks, it would be understandable to assume that they are secured in the same manner as bank accounts. Well, they’re not. While the FDIC protects checking and savings accounts up to the value of $250,000, the approximately 25,000,000 safe deposit boxes across the US are not subject to any federal legislation. State legislation applies but this is often flimsy and is not applied consistently. Often, banks are under no obligation to compensate their customers for any losses from their safe deposit boxes. Where some liability does exist, it is typically limited contractually and is based on rent and not the value of the goods held in the box.

Whatever the circumstances, financial institutions will always avoid paying up if they can. Speaking to The New York Times, Safe Deposit Specialists founder David McGuinn explains, “[t]he big banks fight tooth and nail, and prolong and delay — whatever it takes to wear people down…The larger the claim, the more likely they are to battle it for years.”

It’s important to note that some blame can fall on the customer. For instance, many customers do not read the details of their contract for a safe deposit box and liability limits can be easily missed. For instance, Poniz’s bank, Wells Fargo, will pay a maximum of just $500 for any lost, damaged or stolen safe deposit box items. While other banks offer far more substantial payouts, such as JPMorgan Chase, which provides as much as $25,000 in compensation, customers can have valuables worth millions in safe deposit boxes. Sometimes, customers can jeopardize the security of their valuables themselves by sharing their box with family and friends or granting others access to their box.

When banks make mistakes

Banks can frequently rely on the law to avoid paying compensation for lost or compromised safe deposit box items. Customers may still be left out in the cold even when errors are due to the bank, to dubious court decisions or fraudulent behaviour. The following examples are just a small selection of instances where banks have not been required to pay customers compensation for losses:

• when bank branches close and safe deposit boxes are ‘lost’;
• when banks re-rent a box that is already in use (valuables will typically disappear when someone new takes ownership of the box);
• court decisions where valid negligence claims are dismissed as they were not filed within the required limitation period;
• court decisions that bind customers to new terms for safe deposit boxes, including when an original agreement offers more favourable terms.

So, safe deposit boxes aren’t that safe, what should I do?

You have valuables and you need to store them safely. If safe deposit boxes are not the best option, what should you do? Kiplinger personal finance journalist Bob Niedt advises people to store high-value goods, such as watches and coins, in a home safe, specifically, one that is burglar-proof and is bolted down. For important documents, a water and fireproof document safe is a good option. However, unless your safe can maintain an internal temperature of less than 125 °F, do not use it to store DVDs or flash drives. There are several online retailers, storage and home-goods stores out there that sell reliable, sturdy safes. It’s always a good idea to compare prices, as you’ll find a lot of the same safes or similar models available from different outlets.

Still want to use a safe deposit box?

If you still prefer to leave your valuables in a safe deposit box rather than storing them at home, there are a few tips that can improve your experience. Firstly, do not store cash in a safe deposit box as cash deposited there is not insured by the FDIC as it would be if you deposited it into your bank account.

Secondly, don’t keep your passport in a safe deposit box if only because you may need it at short notice. You can keep a copy in your box but keep your actual passport to hand. This is even more important when it comes to wills. Keep a copy in your box but do not store your original will in a safe deposit box. According to substantial legal precedent, when someone passes away, their bank seals their box and only allows the executor of the will to access it when they have proven their legal right to do so. If your will (which names your executor) is locked away in a safe deposit box, this can seriously delay the execution of your will.

Additionally, as the report by The New York Times makes abundantly clear, if you do store valuables in a safe deposit box, make sure everything in your box is fully insured. Remember, you cannot rely on FDIC insurance for safe deposit box losses and the bank won’t compensate you either unless explicitly stated in your contract.