Renting a safe deposit box or buying a fire-resistant file holder can give you peace of mind.
Although no one wants to dwell on the natural disasters, accidents or fires that can destroy your home and everything in it, planning for the worst can give you peace of mind. And if the worst were to happen, you'll be prepared to rebuild your life.
There are many ways to protect documents that you'd never want to lose. Some people rent a safe deposit box at a bank; others prefer to keep things at home in a fire-resistant safe.
What's best for you? It depends how worried you are about fire damage, theft, and accessibility.
Here's what you should know about safe deposit boxes and at-home storage options.
Bank safe deposit boxes are pretty darn secure. The bank verifies your signature against the one on your rental contract before you can view the box's contents, never leaves anyone unattended inside the vault and requires two keys to open your box -- yours and the bank's guard key. What's more, these boxes are kept in an alarmed, steel or concrete vault that has motion sensors, video cameras, heat detectors and other security devices. After all, it's the same vault that the bank uses to store its records and money, according to David McGuinn, president of Safe Deposit Specialists, a safe deposit consulting firm in Houston, Texas.
The main disadvantage to renting a safe deposit box is that you can only access it when the bank is open, so you wouldn't want to put anything inside that you might need in an emergency, such as your passport or burial instructions.
Another downside is that your safe deposit box is sealed upon your death. So if your original will is in the box, rather than in your house or at your attorney's office, it might take a long time for your executor to get her hands on it. States have different laws regulating access to a safe deposit box after the owner's death, so ask the bank if a court order or other official action is required for someone to open your safe deposit box upon your death -- a power of attorney document that designates who should have access to your safe deposit box won't do the trick, McGuinn says.
Also, if you rent a box with your spouse, child or someone else, the other individual should sign the bank's rental contract as a joint renter.
Of course, there's no 100 percent guarantee that a natural disaster won't destroy or damage your bank -- and its safe deposit boxes -- but the companies that make the safe deposit boxes and the vaults that house them make them resistant to earthquakes, explosions, fire, flood, and heat, according to an article published in the FDIC Consumer News. If damage should occur, however, FDIC insurance doesn't cover the contents of your safe deposit box.
If you rent a safe deposit box, remember to keep a list of what's inside!
Cost: Annual rental fees start at $20, depending on the size of the box.
If you want to keep your financial papers out of reach to an inquisitive relative, babysitter, or child, it doesn't cost much to buy a lockable file cabinet. Spend a bit more to buy a large fire-resistant file box, file cabinet, or safe and you'll give yourself more protection from theft and fire.
Any item that claims to be fire-resistant should have a rating from Underwriters Laboratories indicating how long the item's interior remains protected during a fire: The shortest time is a half-hour; the longest is four hours. For most household fires, an item that's UL-rated fire-resistant for one half-hour should be adequate, according to a spokeswoman for Sentry Group, which makes fire-resistant safes.
When evaluating different fire-resistant items, consider what you might put inside that requires protection: Paper burns at 450 degrees F, but temperatures as low as 125 degrees F can damage computer disks and audio/visual media, such as CDs and videotapes. An item's UL class rating reflects how much heat it can withstand: Class 125 protects floppy disks; Class 150 protects film, magnetic tape and videotapes; Class 350 protects paper documents, fabric, and metals (coins, jewelry, etc.).
Of course, if you live in a flood-prone area, invest in something that's water-proof as well as fire-resistant.
If theft is also a concern, you might want to look at a floor or wall safe -- both are much easier to conceal than a safe -- or a safe that you can bolt to a closet shelf or floor. (And if you opt to pay a pro to install your floor safe in cement, it'll really be difficult to steal!) But unless you have $1 million in cash or thousands of dollars of jewelry in your house, anything bulky and heavy is likely to successfully deter a burglar -- especially something that weighs too much for the thief to tuck under his arm and carry out your front door.
However, a fire-resistant item isn't the best bet for collections of paper items, such as stamps or comic books, which could be browned by the fire or damaged by water from the fire fighters' hoses. Instead, store these collections in a safe deposit box.
Cost: From $40 for a small fire-resistant box to $2,000+ for a fire-resistant file cabinet.