How safe is that safe-deposit box?
Actually, its pretty safe. But you may want insurance just in case.
On her daughter's wedding day, Zulekha Kureshi made an early morning trek to her bank to pick up some prized possessions - tens of thousands of dollars worth of antique gold and diamond jewelry that the family had saved for such occasions.Skip to next paragraph
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But she soon discovered that the jewelry was gone.
"The bank had drilled our safe-deposit box without any witnesses and told us the box was empty when they opened it," says Latif Kureshi, Zulekha's husband. "We believed the bank was the safest place to keep our jewelry."
The bank, Mr. Kureshi adds, "won't even talk to us."
The family has since hired an attorney to file a lawsuit. Bank officials, citing privacy laws, declined to discuss the matter.
Despite the fact that millions of Americans rely on bank safe boxes to protect their valuables, some box owners like the Kureshis have learned that these boxes are not as safe as they might have believed.
"Banks do not insure the contents of safe-deposit boxes," says David McGuinn, founder and president Safe Deposit Specialists in Houston. "Many, many people assume the contents of their safe boxes are insured by the bank or by the FDIC, but they aren't. You have to arrange for your own insurance."
Valuables in a safe box aren't like cash in a savings account that the bank can use to make loans to other clients, Mr. McGuinn points out. That is one key reason why items in a safe box is not FDIC- insured to $100,000, as are cash accounts.
Banks carry only liability insurance. Individuals can collect only if they prove the bank was negligent, says McGuinn, who is often called as an expert witness in safe-deposit cases.
To be absolutely sure that a specific item of value is covered, insurance industry experts recommend that individuals attach a separate "floater" to their homeowner's or tenant's insurance policy.
Most policies fail to mention the words "safe deposit" or "safe box," says insurance agent Dick Van Duzer of Dick Van Duzer & Associates in Los Angeles.
Such an omission could lead to a dispute if items in a safe-deposit box are lost or stolen. "For items that aren't scheduled, there's a big limitation on theft," he says.
Mr. Van Duzer mentions that he can't recall a single instance of someone attempting to collect on an item missing from a safe-deposit box in his more than 40 years in the business, adding that he has only had one client who specifically requested in-vault coverage.
McGuinn is now trying to get banks to be more proactive in letting people know that belongings in safe deposit are not insured. He has advised banks to post signs near the safe-deposit vault reminding people of this fact and to place a similar statement in the safe-box lease agreement.
A safe-deposit vault located in one of the smaller World Trade Center buildings, for example, proved vulnerable to extreme heat that resulted from the Sept. 11 terrorist attacks. Burning jet fuel reduced documents inside to ash and jewelry into heaps of molten metal. "People are now claiming the bank never told them their belongings weren't insured," McGuinn says, adding that the wording of the lease was vague.
The fine print on the lease told box holders that the contents of their safe-deposit boxes "may not be fully protected" by the insurance coverage maintained by the bank.
That passage led some box renters to believe the items would be at least partly insured. However, the insurance ultimately covered only liability if the bank were found to be negligent.
That was determined not to be the case in the WTC attacks, and a class-action lawsuit filed by several box holders was recently denied.
"We now have the option of appealing that decision or just representing the class as individuals," says attorney Bill Dahill, but he doesn't know when that decision will be made.