Cash Deposit (CD) Balance in Group Health Insurance

A cash deposit account is quite similar to a bank account. The main purpose of this account is to store the funds provided by the employers as an advance for the premium to be paid.

With multiple employees leaving and joining the company, employers may forget to update the insurer and request additions and deletions of the insured members.

Thanks to cash deposit (CD) accounts, employers can park an extra premium amount, which helps them meet the due dates without worrying about the employees' ongoing movement.

The money held in the cash deposit account is called the cash deposit balance. This balance is maintained with the insurance company and is utilised for premium payment.

The cash deposit balance helps ensure that all policy members are adequately covered at all times and facilitates insurance-related transactions.

Another plus point of cash deposit balance in group health insurance is that it allows the employer to add additional funds to the account, which can be used in case the premium due exceeds the usual premium charges.

• The employer/policy buyer deposits a buffer amount at regular intervals.

• The deposit made in the account increases the cash deposit (CD) balance.

• On the due date, the premium for the policy is deducted from the CD balance.

• In case an employee leaves the company, the insurance company refunds the paid premium in the CD account.

• If a new employee joins the company, the insurance policy is purchased through endorsement, and the insurance company debits the additional premium amount from the CD balance.

For Employers:

• Facilitates the process of adding and removing employees from the insurance policy.

• Helps in managing premium payments efficiently.

• Makes the endorsement process easier.

• Saves the employer from making individual premium payments for every new employee.

For Employees:

• Allows them to enjoy policy benefits instantly.

• Ensures that employees remain covered right after joining.

Quick Processing- A healthy cash deposit balance allows the insurance company to quickly add the new employee to the list of insured members.

Instant Coverage- The joiner becomes part of the group medical insurance policy immediately, which makes him eligible to utilise the financial coverage.

Stability- Maintaining high cash deposits helps companies mitigate risks like non-payment of premiums due to insufficient funds.

There is no one-size-fits-all cash deposit balance that you should maintain. However, it is recommended that you at least keep 20% over your current premium as the additional amount.

For example- if the set premium for your group health insurance is ₹2,00,000, then your cash deposit balance should be around ₹2,40,000.

While there is no particular rule for having a cash deposit account, it is still suggested that employers consider opening a cash deposit account. This is due to clause 64VB of the Insurance Act of 1938.

This clause is made to protect the interests of policyholders by setting up some guidelines for the insurers. Section 64VB states that:

• No insurer shall assume any risk with respect to the insurance policy until the premium is paid by the insured. The financial cover should only be provided after receiving the premium.

• Even in cases where the premium can be approximated in advance, no insurer shall assume the risk before obtaining the premium receipt.

As this section makes it clear that insurance cover can only be provided after the payment of the premium, it becomes essential for policyholders to pay the premium beforehand to stop the policy benefits from lapsing.

By opening a cash deposit account and maintaining a health cash deposit balance in it, you can ensure that even your newest employees are covered by the group health insurance policy.

Not maintaining a healthy cash deposit balance disturbs the flow of premium payments, which can lead to the rejection of claims by the insurance company.

Since an insurance company provides cover only after receiving the premium, its partial or non-payment will leave the insured members exposed to financial risks.

A cash deposit balance is one of the main elements of group health insurance plans. It ensures smooth premium payment, allows the insurer to make adjustments when adding or removing a member from the policy and helps companies offer quick and easy insurance membership to employees.

With Tata AIG, you can buy a comprehensive group medical insurance policy and help your employees get extensive coverage for health emergencies.

With our group medical insurance policy, the insured not only gets reimbursement for medical expenses paid for his in-patient treatment but also gets the chance to add family members and get compensation for their treatment as well.

Explore our business insurance in India and ensure business continuity and a healthy and motivated workforce.

How to open a cash deposit account?

You can open a cash deposit account at the time of purchasing the group health insurance plan. For this, you will have to negotiate with the insurer and go through the paperwork, provide the insurance company with necessary details about your company and the number of employees.

Once the paperwork is done, your insurer will set up your cash deposit account and give you its access.

Are there any charges for opening a cash deposit account?

No. There are no additional charges for opening and maintaining a cash deposit account.