Cash Deposit (CD) Balance in Group Health Insurance

How Does Cash Deposit Account Function?

Initially, the employer will have to deposit a buffer amount in the CD account so that the insurer will have to bear the credit balance maintained in the account. 

However, these accounts do not bear any interest on the amount lying with the insurer. So, whenever an employee joins, the insurance policy is purchased through endorsement and the amount gets deducted from the CD account. 

Apart from this, when an employee leaves the company, the paid amount gets refunded to the CD account. Hence the objective of a cash deposit account is to hold the buffer amount

Why is it Important to Maintain a Healthy CD Balance?

Group health insurance covers commences only after the premium has been paid for that employee who recently added/Joined. If you maintain a healthy CD balance in insurance, the newly joined employees will be covered from their date of joining. Therefore, it is important for HRs/employers who hold group health insurance policies to ensure that their CD account balances are as high as possible.

Balance to Maintain in CD Account

It is important to keep at least 10% of your total premium in a CD account so that you are prepared for any aggressive hiring plans.

Case Scenario: If the total premium for your group health insurance policy is Rs 1 Lakh then it is recommended to keep Rs 10,000 extra loaded in the CD account.

Conclusion

it is important for group health insurance holders in India to maintain a healthy Cash Deposit Balance. This allows the company to pay out claims quickly and efficiently, while also providing peace of mind to policyholders. By keeping your CD balance above a certain level, you can ensure that your coverage remains active and uninterrupted.