What is a Cash Deposit Balance in Health Insurance?

A cash deposit balance account in health insurance is like a bank account in which the insured can park his premium amount, which will be utilized in the future to provide health insurance coverage to its employees.

The cash deposit account is usually available in the group health insurance policies where there would be continuous additions and deletions of the insured members.

It would not be practically feasible for the insured to pay the premium every time a new employee joins the organization and at the same time, it would be cumbersome for the insurance company to refund the premium every time an employee leaves the organization and is therefore removed from the group health insurance coverage. 

Cash deposit accounts are created by the insurance company to facilitate insurance related transactions for the insured.

These accounts are interest-free accounts as there would be no interest offered for the premium amount parked in these accounts.

The Cash deposit account is specific to the insured customer and only that particular customer can carry out the insurance-related transactions with that account. 

How does it work? 

• At the time of purchasing the group health insurance policy, the insured can decide to open the cash deposit account and park 10-20% of the premium amount which is over and above the basic premium amount in this account.
  
  The limit of the amount that can be parked in the cash deposit account could be decided by the insured as the account does not offer any interest on the funds lying in the account. 
  
• If any new employee joins the organization and enrolls under the group health insurance plan, the insurance company would add the employee to the group health insurance plan immediately with the date of addition being the date of joining of the employee and utilizing the amount from the cash deposit account.
  
  If the cash deposit account is not present, then the date of coverage for the newly joined employee would be that of the date of receipt of premium funds into the account of the insurance company. 
  
• If any existing employee leaves the organization and is to be removed from the group health insurance policy list, then the insurance company would remove the employee and refund the premium on a pro-rata basis to the cash deposit account.
  
  In case of the absence of the cash deposit account, it would take a couple of days for the premium amount to be refunded to the insured. 

Advantages of Cash deposit account: 

Beneficial for employees:

A cash deposit account is beneficial to the new employees joining the organization as one intimation by mail would suffice to add the employee from the date of joining even if the intimation is made a few days after the date of joining.

This is because the insured is maintaining the cash deposit account with the insurance company and the 64VB issue would not arise. In case of premium payment with a cheque or any other mode, the coverage would start from the day of premium receipt and not necessarily from the joining date.

This might result in inconvenience to the employees who would not have insurance coverage for a brief period. 

Reduces hassle for both parties:

Maintaining a cash deposit account reduces the hassle for both parties i.e. insurance company and the customer as the premium would be deducted directly from the account to provide insurance coverage instead of waiting for the payment and the refund would be credited to the cash deposit account.

If any employee leaves the organization, the pro rata premium refund would be made to the cash deposit account. In a big organization with many members in the group health insurance policy, there would be many people leaving and joining the organization in a month.

This way the insurance company need not do the additions and deletions premium processing for each and every case but instead can adjust the premium amount directly from the cash deposit account. 

A cash deposit balance account does not have any charges to open or maintain it, and it can be closed once the customer decides not to renew the group health insurance policy with the specific insurance company.

A cash deposit balance account cannot be transferred from one insurance company to another.