The number of safe deposit boxes has been declining for decades, and the number dropped significantly in the last few years as many banks shrunk their physical footprints and closed branches. To put it into perspective, Bank of America has about 69 million customers, but only 2 million safe deposit boxes.
There are approximately 25 million safe deposit boxes in the United States — that’s one for every thirteen Americans. That said, although they’re not as popular as they used to be, safe deposit boxes are still in demand. Bank customers use these boxes to store a variety of personal items and valuables, but before renting a box, they have one key question — are safety deposit boxes safe?
As a banker, you want to be able to answer yes if your customers ask about the safety of your boxes. If your financial institution plans to offer this classic service to your customers, you need to ensure that you embrace policies that protect yourself and your customers. As you create or review your safe deposit box practices, keep these 10 facts in mind.
1. Safe deposit boxes are safer than home safes.
While marketing safe deposit boxes to your customers, let them know that these boxes are safer than home safes. Safe deposit boxes at banks are physically stronger than most home safes, adding additional protection against natural disasters.
They’re also backed by the bank’s general security and its specific safety box security efforts. Thieves have to go through multiple security elements to reach a safe deposit box. In contrast, it’s generally much easier to break into a home.
2. Accidents and natural disasters harm about 33,000 safe deposit boxes per year.
Of course, nothing is foolproof, and even banks endure natural disasters. On average, about 33,000 safe deposit boxes are harmed by accidents and natural disasters every year. To put this number into perspective, about 15 million homes are affected by natural disasters every year in the United States.
You can leverage this fact to promote safe deposit boxes. But also keep in mind that you need to protect your bank against natural disasters. This can be an even bigger threat than theft.
3. Bank robbers typically don’t target safe deposit boxes.
One of the reasons that safe deposit boxes are safer than home safes is that thieves don’t target them. In the last five years, the FBI reported 19,000 bank robberies and only 44 of them involved safe deposit boxes.
When you break down the numbers, that’s about 4,000 bank robberies per year and only about 8 or 9 involve safe deposit boxes. In contrast, there are nearly 1 million home burglaries each year. In other words, a home is about 250 times more likely to get robbed than a bank.
Unfortunately, there are no statistics on how many of these burglaries involve home safes, but it’s reasonable to assume that the thieves are going to grab the most valuable stuff they can find when they’re in a home.
4. Banks can offer different amounts of liability protection for safe deposit boxes.
There are no laws requiring financial institutions to insure the contents of safe deposit boxes. However, you may want to offer some coverage as a customer service measure.
Banks take a range of different approaches to this issue. Some offer $500 in liability coverage, while others offer $25,000. Many financial institutions base the coverage on the annual rental of the box. For instance, they may cover up to 10 times the annual box rental amount.
5. Customers may be able to cover box contents with homeowner’s insurance.
Even if you aren’t legally required to offer liability protection to your customers, you still should find ways to help them protect the contents of their safe deposit boxes. This is important from a customer service angle. It helps to improve the customer journey and potentially increases their satisfaction with your bank.
In particular, consider advising your customers to contact their home insurers. Although your customers aren’t storing these items in their homes, their home insurance policies may cover them.
However, your customers shouldn’t assume that their box is covered. They should contact their insurer directly. This is especially important for high-value items that may need an add-on policy that increases the personal property coverage for specific items.
6. You can ban customers from storing cash in their safe deposit boxes.
Storing cash in a safe deposit box is not safe, and it’s not a financially sound practice. In a worst-case scenario, if your financial institution went under, your FDIC insurance would cover cash deposited in your customers’ accounts, but it would not cover cash in safe deposit boxes.
Additionally, cash in a safe deposit box, like cash under a mattress, can never beat inflation. Your customers lose value when they store money like this. To protect your customers from losses, you may want to prevent them from storing cash in their boxes. You simply need to include this rule in your safe deposit box agreement.
7. A clear rental contract is critical.
Regardless of the rules or liability coverage you want to offer with your safe deposit boxes, you need a clear rental agreement. Your agreement should outline the rules and expectations you have for your box holders, and it should also explain your financial institution’s responsibilities.
To ensure that you protect your financial institution, you may want to consult with an attorney. They can help you ensure the contract will protect you if a customer ever takes you to court over a loss. They can also ensure that your contract meets the legal requirements of your state.
8. State law dictates processes for opening and emptying safe deposit boxes.
In some cases, you may need to open and empty a safe deposit box. For instance, if someone stops paying their rent and abandons the box, you may need to empty it. Or if you’re closing a branch, you may also have to open and empty boxes.
Make sure that you check with state laws about this process. There are often very specific requirements about how you alert customers, inventory the box, and deal with its contents. To protect your bank from liability, you need to understand these laws.
9. Banks need clear processes for dealing with the death of a box holder.
In most cases, state law also dictates what happens if the box holder dies. You need to ensure your safe deposit box policies reflect the laws of your state. You may want to require box holders to name an executor or beneficiary of their box in case they die.
10. Safe deposit management tools can improve safety and streamline operations.
Safe deposit box management tools can help your employees screen box holders more accurately. When someone wants to access their box, these tools show your employee the box holder’s ID so they can compare it to the ID of the person requesting access.
Management tools can also track access logs, store rental agreements, generate invoices, and send out late notices. These tools reduce operational costs associated with safe deposit boxes, and they also protect your bank from fraud.
Provide Safe Solutions to Your Customers
The demand for safe deposit boxes has outpaced the rate that banks have stopped offering these services. This discrepancy creates powerful opportunities for banks that want to offer safe deposit boxes, and a key part of your marketing strategy should focus on the safety of the box.
To learn more about safe deposit box management tools and other anti-fraud solutions, contact us today. At SQN Banking Systems, we offer a broad range of fraud detection and prevention tools and services. We can help you protect your safe deposit boxes as well as the rest of your services and transactions.
FAQs About Safe Deposit Boxes
How safe are safe deposit boxes?
Safe deposit boxes are safer than home safes, but they are still subject to risks of theft and losses. To make your boxes as safe as possible, implement strict management procedures and invest in tools to reduce the risk of fraud.
How secure is a safety deposit box?
The security of a safety deposit box varies based on the bank’s management practices. The safest banks require box holders to show photo IDs before accessing the box, and they don’t allow box holders to be in the vault alone. Safe boxes should require two keys to open: a customer key and a guard key.
What are safety deposit boxes used for?
Consumers use safe deposit boxes to hold valuable items including jewelry, heirlooms, and important paperwork. Safe deposit boxes can be a lucrative source of revenue for banks, and they can help to increase foot traffic in branches.
What happens to safe deposit boxes after the death of the box holder?
State laws determine what happens to the contents of a box after the holder dies. To avoid issues, banks may want to require box holders to name a beneficiary when they rent a box.
What happens to safe deposit boxes when a bank closes?
When a bank closes, the FDIC has another financial institution take over the safe deposit boxes and the rest of the bank. If the FDIC cannot find another institution to take over, it will contact box holders so they can retrieve their contents.
Can you keep cash in safe deposit boxes?
Your bank gets to decide if you allow customers to keep cash in safe deposit boxes. However, in the event of a security breach, tracking cash can be impossible. To protect your financial institution, consider not allowing customers to keep cash in safe deposit boxes.
Is adding someone to a safe deposit box safe?
If your customers want to add someone to their safe deposit box, keep the process safe by requiring both parties to come to the bank in person. Then, check the original account holder’s identity with your records. Make sure to note if the added party is a joint owner or a deputy who can act on behalf of the box holder. Then, capture their signature and ID card for your box holder records.