Updated on: May 31st, 2023
|
11 min read
Uncertainties of life in the modern world have made getting adequate insurance cover imperative for every individual. This is especially important for private-sector employees who do not enjoy the same social security benefits as public sector employees. To extend the benefits of life insurance to private sector employees, the government has introduced the Employees Deposit Linked Insurance Scheme (EDLI) in 1976.
With effect from 28.04.2021, the EPFO has increased the maximum benefit to Rs.7 lakh for the registered nominees of the deceased member.
The Ministry had increased the minimum amount of benefit to Rs.2.5 lakh on Feb 2018. However, the EPFO has further decided to continue with the same minimum benefit of Rs.2.5 lakh with retrospective effect from 15th Feb 2020.
Also, with effect from 28.04.2021, the EPFO has extended the benefit to the nominees of the deceased member who have changed their establishment for employment within a period of 12 months preceding the month of their death.
The Employees Deposit Linked Insurance Scheme or EDLI is an insurance cover provided by the EPFO (Employees Provident Fund Organisation) for private sector salaried employees who are members of EPFO. The EDLI scheme was launched in 1976. The registered nominee receives a lump-sum payment in the event of the death of the person insured (employee) during the period of the service.
EDLI scheme covers all organisations registered under the Employees Provident Fund and Miscellaneous Provisions Act, 1952. They must subscribe to this scheme and provide life insurance benefits to their employees. This scheme works in combination with EPF (Employees' Provident Fund) and EPS (Employees' Pension Scheme).
The objective of EDLI is to ensure that the family of the EPFO members receive financial assistance in the case of the employee's death. There is no exclusion under this scheme. The last drawn salary of the employee decides the extent of the benefit.
Here are the essential elements of EDLI, applied uniformly to all beneficiaries under the policy:
The registered nominee will receive a lump-sum payout in the event of the death of the insured person. If no nominee or beneficiary is registered, then the amount would be paid to the legal heir. With effect from 28.04.2021, the pay-out to be awarded will be calculated as under:
{Average Monthly Salary of the Employee for the last 12 months (capped at Rs.15,000/- p.m.) x 30 } + Bonus Amount (Rs.2,50,000/-)
Therefore, the maximum payout under EDLI is capped at Rs. 7,00,000/-.
The following criteria need to be fulfilled for an employee to avail of coverage under EDLI:
To process the claim under EDLI, the following documents are to be submitted by the claimant: –
The process to be followed by the nominee or claimant to receive the amount under EDLI is as follows:
The employer makes the contribution to these schemes on behalf of the employees. The employee contribution is deducted from the salary before they credit the salary. Employees themselves need not make any direct payment to these schemes.
The contribution of employees is calculated as: –
The contribution of Employer is calculated as: –
However, under Section 17 (2A) of the Employees' Provident Fund and Miscellaneous Provisions Act 1952, an employer can stop contributing to the EDLI scheme if they opt for a better employee insurance policy under a different scheme.
The chief motive of the EDLI scheme is to offer financial security to the family members of the policyholder (deceased person). Family members mean spouse, unmarried daughter or male child up to 25 years of age. The employee cannot choose which of the three schemes, EPF, EPS or EDLI, that he/she wants to opt for, but they are transferable with any change in the job. The new employer will continue to make payment in the existing account only.
The nominee can avail of the EDLI scheme benefits. If an employee has not made any nomination, the benefits can be availed by the family members or legal heirs.
No. There is no minimum service period to enrol under EDLI.
An employer can opt out of the EDLI scheme when they take up a higher-paying life insurance scheme for their employees under Section 17 (2A) of the Employees' Provident Fund and Miscellaneous Provisions Act 1952.
No, an employee cannot opt for higher insurance coverage under the EDLI since the amount is fixed based on the employee's basic wages, dearness allowance, and retaining allowance (if any).
No. Form 5 IF can only be filed offline.
You can check your EDLI coverage amount in your EPF passbook.
Yes, there are exceptions to the EDLI coverage, such as the employee's death due to intoxication, suicide, or participation in hazardous activities. In such cases, the EDLI insurance benefit will not be provided to the nominee or family members.
The importance of insurance in the modern world underlines the significance of the Employees Deposit Linked Insurance Scheme (EDLI) for private sector employees. EDLI, introduced in 1976, provides life insurance benefits through EPFO. Recent enhancements include a maximum benefit of Rs.7 lakh and a minimum of Rs.2.5 lakh. Employers contribute to the scheme, and benefits are based on the employee's salary. Scheme details, eligibility, documents required, and claiming process are outlined.