Employees Deposit Linked Insurance Scheme

Employees Deposit Linked Insurance Scheme

Getting adequate insurance cover is mandatory for every individual as the life in the modern world has become uncertain. To extend the benefits of life insurance to private sector employees, the government has introduced the Employees Deposit Linked Insurance Scheme (EDLI) in 1976.

What is Employees Deposit Linked Insurance Scheme?

EDLI is an insurance cover provided by the Employees Provident Fund Organization for private sector salaried employees and applies to all organizations under the EPF Act. All such organizations must subscribe to this scheme and offer life insurance benefits to their employees. This scheme works in combination with EPF and EPS. The registered nominee receives a lump-sum payment in the event of the death of the person insured, during the period of the service. The extent of the benefit is decided by the last drawn salary of the employee. 

Features of the Scheme-

• Any organization that has more than 20 employees needs to register for EPF. Therefore, any employee who has an EPF account automatically becomes eligible for the EDLI scheme. 
• There are no exceptions to the insurance coverage provided by EDLI. It protects the insured person round the clock, all around the world. 
• An employer can opt for another group insurance scheme, but the benefits offered must be equal to or more than those offered under EDLI. 
• There is no need for the employees to contribute to EDLI. Their contribution is required only for EPF. 
• The contribution of an employer must be 0.5% of the basic salary or a maximum of Rs. 75 per employee per month. If there is no other group insurance scheme, the maximum contribution is capped at Rs. 15,000/- per month.
• For all calculations, the dearness allowance must be added to the basic salary. 
• EDLI applies to all employees with a basic salary under Rs. 15,000/- per month. If the basic salary goes above Rs. 15,000 per month, the maximum benefit is capped at Rs. 7,00,000.
• A bonus of Rs. 2,50,000 is available.

How to calculate EDLI Charge

It is 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.

The maximum payout is capped at Rs. 7,00,000.

Documents required for a payout under EDLI-

• Duly completed Form 5 IF
• Death Certificate of the insured person.
• Succession Certificate in case the legal heir files the claim.
• Guardianship Certificate if the claim is filed on behalf of a minor by a person other than the natural guardian.
• Copy of cancelled cheque for the account in which the payment is to be received.

How to claim the benefits under EDLI

1. The benefits can be claimed by the nominee specified by the insured person. If no nominee was registered, then the family members or legal heirs can apply for the same. 
2. The deceased person should have been an active contributor to the EPF scheme at the time of his/her death.
3. EDLI Form 5 IF, duly completed and submitted by the claimant. 
4. The claim form, signed and certified by the employer. 
5. If there is no employer or the signature of the employer cannot be obtained, the form must be attested by any of the following:  

-Bank manager, in whose branch the account was maintained.

• -Local MP or MLA
• -Gazetted Officer
• -Magistrate
• -Member/Chairman/Secretary of Local Municipal Board
• -Postmaster or Sub-Postmaster
• -Member of the regional committee of EPF or CBT 

6. The claimant must submit all the documents along with the completed form with the regional EPF Commissioner’s Office for processing of the claim. 
7. The claimant can also submit Form 20 (for EPF withdrawal claim) as well as Form 10C/D to claim all the benefits under the three schemes, EPF, EPS and EDLI)
8. Any additional documents required must be furnished at the earliest to process the claim. 

Once all the documents are provided and the claim is accepted, the EPF commissioner must settle the claim within 30 days from the receipt of the claim. Failure to do so entitles the claimant to an interest @12% p.a. till the date of actual disbursal.

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-

• For EPF – 12% 
• For EPS – None
• For EDLI – None

The contribution of the employer-

• For EPF – 3.67% 
• For EPS –8.33% or Rs. 1,250/-
• For EDLI-0.50 or max Rs.75

The primary aim of the scheme is to offer financial security to the family members of the policyholder of the deceased person. Family members include 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 they are transferable with any change in the job. The new employer will continue to make payment in the existing account only.   

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, w.e.f 28^th April,2021.

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Krishna Rath is a SEBI Registered Investment Adviser, and since 2015 has been educating netizens on investments and insurance. Krishna is a fee only SEBI RIA and is Odisha's first SEBI RIA. With background in IT, Krishna is changing the advisory space with new innovations in AdvisoryTech.

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