Each depositor insured to at least $250,000 per insured bank

If you think there isn't much to using a safe deposit box beyond putting keys in locks, you're in for a surprise. The safe deposit service may be tucked down in the basement or far corner of your bank, but in its own quiet way it is among the bank's most important offerings-- and among the most misunderstood.

While millions of Americans rent a safe deposit box, few pay attention to questions such as who could or should have access to a safe deposit box (especially in an emergency) and how the contents of the box are protected. About the only time people ever consider these issues is when there's a problem, and then it may be too late to prevent a loss.

To help you decide whether to use a safe deposit box, and how to use one wisely, FDIC Consumer News has put together the following questions and answers. Several of these questions came from our readers, in response to an appeal from us. We thank everyone who wrote in with questions or suggestions. (To keep things simple, our references to "banks" are intended to apply broadly to banks, savings institutions and credit unions.)

In or Out?

Why should I rent a safe deposit box?

It's a convenient place to store important items that would be difficult or impossible to replace. The box also offers privacy (only you know what's inside) and security. Although many people like to keep valuables close by in a closet, safe or file cabinet at home or in the office, these places probably are not as resistant to fire, water or theft. Also, some insurance companies charge lower insurance premiums on valuables kept in a bank's box instead of at home.

What items should go into a safe deposit box?

Any personal items that would cause you to say, "If I lose this, I'm in deep trouble." Important papers to consider putting into your box: originals of your insurance policies; family records such as birth, marriage and death certificates; original deeds, titles, mortgages, leases and other contracts; stocks, bonds and certificates of deposit (CDs). Other valuables worthy of a spot in your safe deposit box include special jewels, medals, rare stamps and other collectibles, negatives for irreplaceable photos, and videos or pictures of your home's contents for insurance purposes (in case of theft or damage).

OK, what should NOT go in a box?

Anything you might need in an emergency, in case your bank is closed for the night, the weekend or a holiday. Possible examples: originals of a "power of attorney" (your written authorization for another person to transact business on your behalf), passports (in case of an emergency trip), medical-care directives if you become ill and incapacitated, and funeral or burial instructions you make. Consider giving the originals to your attorney, and making copies to go in your safe deposit box or to give a close friend or relative.

If I have a will, shouldn't it go in my safe deposit box?

Whether your will should be at the bank or elsewhere, such as with your attorney, depends on what your state law says about who has access to your safe deposit box when you die. Ideally, the person you name to oversee your financial matters after you die (your "executor" or "personal representative") should have early access to your original will (copies aren't valid). David P. McGuinn, president of Houston-based Safe Deposit Specialists, a consultant to banks and consumer groups, says the recent trend in most states is to make it relatively easy for co-renters, family members or the executor to remove the will and certain other documents (such as life insurance policies and burial instructions) from a deceased person's safe deposit box. In those states, it's a good idea to leave your will in the safe deposit box. "But in some states," McGuinn notes, "it may require a court order or another official action to remove the will, which can take time and money. That's why you should check with a bank official to find out what is required under state law and your bank's own policies in the event of your death."

Access by Others

Can I arrange for someone to access my box in an emergency?

Yes. You can jointly rent your box with a spouse, child or other person who would have unrestricted access to the box. (Warning: In some states your co-renter may face delays in accessing the box if you die. Also, merely giving someone else a key won't be enough to grant access. He or she also must sign the bank's rental contract as a joint-renter.) An alternative is to appoint a "deputy" or "agent" (NOT a power of attorney) who will have access to your box. A deputy/agent and a general power of attorney are similar in that you may grant or revoke the authority at any time, and the appointment ends if you become incompetent or die. The main difference is that a deputy or agent is appointed in the presence of the box renters and a bank employee, which gives the bank greater assurance about the validity of the authorization. "Many people are surprised to find that a power of attorney does not allow access to a box," says Donald Sansone, a Chicago banker who specializes in safe deposit issues. "The bank has no way of knowing if the power of attorney is still in effect or if the renter was competent when the power of attorney was signed."

Can law enforcement authorities access my safe deposit box without my knowledge or permission?

Mark Mellon, an attorney with the FDIC in Washington, says that if a local, state or federal law enforcement agency persuades the appropriate court that there's "reasonable cause" to suspect you're hiding something illegal in your box (guns, drugs, explosives, stolen cash or money obtained illegally), "it can obtain a court order, force the box open and seize the contents." But what about non-criminal matters, such as a dispute with the Internal Revenue Service, a company or other people over money they say you owe? McGuinn of Safe Deposit Specialists says the IRS can "freeze" your assets (effectively placing a hold on your bank accounts and safe deposit box) until the dispute is resolved. Private parties also can freeze your assets but doing so involves going before a judge and proving that there's a legitimate dispute over a debt.

Can a box be declared "abandoned" and the contents turned over to the government?

Yes, but only if you don't pay your rental fee for a number of years (as determined by state law) and after attempts to notify and locate you prove unsuccessful. In that case, your box will be reported as abandoned and the contents will be turned over to the state's unclaimed property office. Often this happens because the renter dies and the heirs have no knowledge of the box or its contents. The good news is that even if the state has sold your unclaimed property, you or your heirs still have the right to claim its value. To contact a state's unclaimed property office (sometimes part of the treasurer's office), check the state government section in your phone book. On the Internet, go to the home page of the National Association of Unclaimed Property Administrators.

What happens to my box if my bank fails?

When an insured bank or thrift closes, the FDIC usually arranges for another institution to take it over, including branches where you might have a safe deposit box. In those situations, you should be able to conduct business as usual. If the FDIC cannot find a buyer for your bank, it arranges for you to remove the contents of your box so you can obtain a box at another institution, if you wish. This is done within a few days after the bank fails.

How Safe?

Are safe deposit boxes protected from fire, flood or other disasters?

The companies that manufacture safe deposit boxes and the vaults that house the boxes make them highly "resistant" to fire, flood, heat, earthquakes, hurricanes, explosions or other disastrous conditions. However, the key word here is "resistant." There's no 100 percent guarantee against damage, and substantial losses sometimes occur.

Are there extra precautions I can take to minimize damage?

Yes. McGuinn offers this advice: Prevent water damage by sealing items in airtight, zip-lock bags or Tupperware-style containers. Also, put your name on each item, keep a list of the box's contents, make copies of important documents and even take photos of your most prized items left in the box. That way, McGuinn says, if a disaster occurs your chances of successfully identifying, claiming or recovering an item would be increased.

Doesn't FDIC insurance cover the contents of safe deposit boxes if they're damaged or stolen?

No. By law, the FDIC only insures deposits in deposit accounts at insured institutions. Although you may be putting valuables, including cash and checks, into an area of the bank that has the word deposit in its name, these are not deposits under the insurance laws that the bank can use, for example, to make loans to other customers. A safe deposit box is strictly a storage space provided by the bank.

Does anyone insure my safe deposit box against damage or theft?

Unless your bank is found to be negligent in the way it handled or protected your safe deposit box, do not expect the bank or its private insurance to reimburse you for any damage or loss. If you're concerned about the safety or replacement of the items in your box, first check whether your own homeowner's or tenant's insurance policy covers your safe deposit box against damage or theft. Many do cover box contents up to a certain dollar amount, even including items lost or damaged when they're out of the box. If your home-related insurance isn't sufficient, talk to your insurance agent about additional protection or find out if your bank is among those selling limited insurance coverage on safe deposit boxes. But before buying any extra coverage, carefully review the policy and do some comparison-shopping.

Can thieves rob a safe deposit box?

Yes, it happens, but fortunately not often. Safe deposit boxes are stored in concrete or steel vaults equipped with sophisticated alarms, locks, video cameras, motion sensors, heat detectors and other security devices. Most U.S. banks also have very strict access procedures, among them: verifying signatures, restricting access to the vault, never leaving anyone unattended inside the vault, and requiring two different keys (one being the bank's "guard key") to open a box. You can do your part to prevent a rip-off by following our recommendations to consumers below.

Final Thoughts

It's smart to want to protect irreplaceable documents and valuable possessions, for yourself
and your heirs. We hope this report has given you answers and ideas to make you even
smarter- and safer- when it comes to making decisions about a safe deposit box.

Making Your Safe Deposit Box Even Safer

These simple measures should prevent thefts from your safe deposit box Before renting a box: Read the security and operating procedures in your rental contract. Talk to the vault attendant about access procedures and security devices until you are comfortable with the level of protection. ''Observe such things as whether customers, locksmiths or other people are left alone inside the vault, which may give them an opportunity to tamper with the locks," says Kate Spears of the FDIC's Division of Compliance and Consumer Affairs in Washington. ''Nowadays, devices such as electronic lock-picks or other special tools can be used in a flash and leave no sign of tampering— except that the contents of the box are missing." Also, make sure the bank's safe deposit area has a ''viewing" room or booth outside of the vault that you can use to inspect your box's contents in privacy and safety. At home: Keep your two safe deposit box keys apart from each other and in safe places (not with your house keys or car keys). Don't keep your keys on a key ring or in an envelope that would indicate the bank's name or the location of your box. Give your extra key only to someone you trust. ''If even one of your keys is lost," says Chicago banker Donald Sansone, ''notify the bank immediately so their personnel are on alert against someone trying to perpetrate a fraud." If both keys are lost, you should get a new box (and be prepared to pay to have your old box drilled open). Keep written and photographic records of your box's contents at home, in case any items are lost and you need to file a claim. Also check your home insurance policy to see if it covers the items in your box against loss or damage. Inside the vault: Accompany the bank employee into the vault, and be sure no other customers are there with you. After you arrive at the vault, it's OK to give the attendant your key for the few seconds it takes to open or close the box door, but never lose sight of the key and never leave it in the box door. An unscrupulous attendant or dishonest customer only needs a few seconds to make a wax impression of your key, which can be used to make a duplicate. Also, never let a bank employee take the box out of your sight. When you return your box to the vault, be sure the box door is properly locked and that you have your key before you leave. ''Don't allow a bank employee to keep your key and handle transactions for you if you're not there— something elderly customers have done and regretted," adds Carol Mesheske, chief of a section in the FDIC's Division of Supervision that monitors fraudulent activities at banks. Outside the vault: Only open the safe deposit box when you're inside the viewing booth and away from bank employees and customers. ''Before leaving the privacy booth, make sure all valuables are safely back inside the box," recommends Gene Seitz, also of the FDIC's anti-fraud group. ''And make sure there's nothing left behind that may indicate the contents of your box, such as a currency strap, a specially-marked envelope or an empty jewelry box." If there's a problem: Tell a bank manager if the vault attendant seems a bit lax in following security procedures or if you spot something suspicious going on. Immediately report to the manager any items you believe are missing from your box or if there are signs of unauthorized or forced entry. If you're pretty sure you've been victimized, it's also a good idea to contact the National Fraud Information Center (phone: 800-876-7060), which reports suspected crimes to law enforcement agencies. If your bank doesn't resolve the matter to your satisfaction, you may contact its federal regulator.