The future is always uncertain, and being well prepared for it is what we can do today. Insurance is one of the best ways that offer financial support to the family. The Government in 1976 introduced the Employees Deposit Linked Insurance Scheme (EDLI) for private-sector employees. The main motive of the Employees Deposit Linked Insurance Scheme (EDLI) is to offer financial security to the account holder’s family. In case of untimely demise, the EDLI scheme offers financial support to dependents of the deceased. This article covers in detail about EDLI, its features, contributions and how to file a claim.
What is EDLI?
The Employee Provident Fund Organisation (EPFO) offers insurance cover to private sector employees under the Employees Deposit Linked Insurance Scheme (EDLI). All registered organisations under the Employees Provident Fund and Miscellaneous Act 1952 can apply for EDLI. All the registered organisations have to subscribe to the EDLI scheme and offer life insurance benefits to their employees.
The Employees Deposit Linked Insurance Scheme (EDLI) works in combination with the Employee Provident Fund (EPF) and Employee Pension Scheme (EPS). The extent of the benefit under the scheme is decided on the last drawn salary by the employee. Upon the demise of the person insured during their period of service, the registered nominee is eligible for a lump sum payment.
Following is the formula to compute the EDLI pay-out:
[Employee’s Average monthly salary for the last 12 months (capped at INR 15,000 per month) * 30] + Bonus Amount (INR 2,50,000)
Note: The maximum benefit an employee can receive under EDLI is INR 7,00,000.
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Features of Employees Deposit Linked Insurance Scheme
Following are the key features of the Employees Deposit Linked Insurance Scheme (EDLI) that apply to all the beneficiaries of the policy:
- The claim amount is 30 times the salary of the employee.
- EDLI applies to all the employees whose basic salary is less than INR 15,000 per month. If the basic salary is above INR 15,000 per month, then the maximum benefits one can receive is INR 7,00,000.
- EDLI offers a bonus of INR 2,50,000. The minimum amount of benefit that EPFO offers is INR 2,50,000 with retrospective effect.
- Organisations with more than 20 employees have to register for EPF. As a result, an employee who holds an EPF account will automatically become eligible for the Employees Deposit Linked Insurance Scheme (EDLI). In other words, employees don’t have to contribute towards EDLI separately.
- Employees Deposit Linked Insurance Scheme protects the insured person round the clock with no exceptions to the insurance coverage.
- Employers can take other group insurance policies. However, the benefits from such a scheme have to be equal to or more than the benefits offered under EDLI.
- Employer’s contribution is at 0.5% of the basic salary or a maximum of INR 75 per month per employee. If the company has no other group insurance policies, the maximum contribution is capped at INR 15,000 per month.
- EDLI considers both the basic salary and dearness allowance together for all calculations.
- The benefit is directly credited to the claimant’s account.
- Age and other factors do not have any impact on the employee’s eligibility for the scheme.
- As per Section 17(2A) of the Employees Provident Fund Act, the employer can choose to opt out of the EDLI. If they have a better insurance policy for their employees.
Contribution Under Employees Deposit Linked Insurance Scheme
For the Employees Deposit Linked Insurance Scheme (EDLI), employers contribute on behalf of their employees. Employers deduct the EPF contribution from the employee’s salary before crediting it. Therefore, employees don’t have to make any separate payments to the scheme.
EPF – 3.67% of the basic salary
EPS – 8.33% of the basic salary or INR 1,250
EDLI – 0.5% of the basic salary or a maximum of INR 75. (Also, if the company has no other group insurance policies, the maximum contribution is capped at INR 15,000 per month.)
EPF – 12% of the basic salary
EPS – Nil
EDLI – Nil
Documents Required for EDLI
For processing the Employees Deposit Linked Insurance Scheme claim, the nominee has to submit the following documents:
- Duly filled Form 5 IF.
- Death certificate of the insured employee.
- Legal heirs have to submit a Succession Certificate.
- In the case of a minor, a Guardianship Certificate is mandatory in the absence of a natural guardian.
- A cancelled cheque for the account details in which the payments are to be received.
How To File a Claim Under EDLI Scheme?
The Employees Deposit Linked Insurance Scheme benefits can be claimed by the registered nominee of the insured person. In case a nominee name is not present, the legal heirs or family members can apply for the claim. To process or file a claim under the EDLI scheme, the nominee has to follow the below procedure:
- At their death, the deceased person should have been a regular contributor to the EPF scheme.
- The claimant must submit a duly filled EDLI Form 5 IF.
- The Form 5 IF has to be signed and also certified by the employer of the demised person.
- In the absence of the employer or if it is difficult to attain the signature. The form has to be attested by any one of the following:
- Bank manager of the branch in which the account is present.
- Local MP or MLA
- Member or Chairman or Secretary of Local Municipal Board
- President of Village Panchayat
- Gazetted Officer
- Post Master or Sub-Postmaster
- Member of the regional committee of EPF or CBT
- To process the claim, the applicant should submit all the documents and also the claim form at the regional EPF Commissioner’s Office.
- To claim all the benefits under EPF, EPS, and EDLI, the applicant must submit Form 20 and also Form 10C/D as well.
- In case of any requirement for additional documents, the claimant must furnish them at the earliest to process the application.
- The claim processing will happen only after the submission of all the documents and acceptance of the claim. Furthermore, the EPF commissioner has to settle the claim within 30 days of the receipt of the claim. In case of any delay, the claimant is entitled to receive interest at 12% p.a. until the date of actual disbursal of the amount.
Check Out EPF Form 5