About half of safe deposit box holders mistakenly thinkfinancial institutions or the government will reimburse them iftheir boxes are damaged, according to a poll by SurveyUSA. That'sprompted one Elgin, Ill.-based startup to launch a product thatcould also generate novel new fee income for credit unions.

The company, called Safe Deposit Box Insurance Coverage, LLC,has devised and patented insurance for safe deposit boxes. CEOJerry Pluard (pictured) said it's an answer to an often overlookedproblem: The NCUSIF and the FDIC don't actually insure the metalcontainers many people use to house birth certificates, familyheirlooms, important records and other valuables.

“They never have and they never will, because they don't knowwhat's in it,” he said.

Pluard's company launched its product in the fourth quarter of2013 and partners with credit unions and banks to offer up to$500,000 of coverage per box. The company doesn't require boxholders to divulge what they're storing.

“Anything other than illegal contraband is fully insurable,” hesaid.

Coverage starts at $5,000 for a $25 premium. The average premiumis about $80, which is enough to cover about $25,000 to $30,000 ofproperty, Pluard said.

Homeowners' policies often do cover safe deposit boxes, Pluardnoted, but standard policies typically only pay $1,500, may requireappraisals and disclosures about what's in the box, may not coverwater damage or papers and usually have deductibles, he said.

Direct coverage, on the other hand, presents a new way for credit unions to monetize their safe deposit boxofferings. They get a 10% to 20% cut – around $10 per box on apolicy with an $80 premium – when members buy through the financialinstitution. In some cases, SBDIC pays credit unions a flat fee forevery policy members buy, Pluard added.

AXA Insurance underwrites the policies, which Pluard said haverenewal rates of around 90%.

“It becomes a nice little annuity stream,” he said.

Pluard said the company just started marketing to credit unions, and two credit unions have signedup so far: the Muncie, Ind.-based PrimeTrust Federal Credit Union,which has $149 million in assets and 17,500 members, and the SanJose, Calif.-based Meriwest Credit Union, which has $1.1 billion inassets and 70,800 members. Including banks, however, the companyhas insured at least 10,000 boxes, he said. The company estimatesthe nation's credit unions hold four to five million safe depositboxes.

Damage to safe deposit boxes does happen.

“In the last 40 months there's been over 50,000 boxes impactedby some form of natural disaster, fire, flood, or a burglary/robbery,” Pluard said.

Based on what customers typically insure their boxes for, heestimated more than a billion dollars of property was in those50,000 boxes.

However, the chances of damage do appear small: Even if all50,000 of those boxes belonged to credit unions, they wouldrepresent just 1% to 1.25% of all the boxes at credit unions.

But the damage isn't just physical – it can also bereputational, Pluard noted.

“The scenario and the narrative is always the same. People arevery upset because they didn't know they weren't insured, and thebank and the credit union comes in and says, 'Come and get yourstuff; we've got to empty it out, we've got to repair the buildingand do whatever we need to do.' They're not responsible for thedamage,” he explained. “This is some of the most precious property,whether it's emotionally important or economically valuableproperty that consumers have.”

He added, “If you destroy the trust because they didn't feelthey were adequately informed that they needed to get insurance orconsider insurance, that's a very difficult thing to overcome froma customer standpoint.”