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Employees Deposit Linked Insurance Scheme

In the present day and age, life is full of uncertainties and it has become imperative for an individual to secure themselves with insurance. Individuals working in the private sector, especially, do not get the same facilities and privileges of public sector employees. Hence, the government of India has introduced the Employees Deposit Linked Insurance Scheme (EDLI) in the year 1976 to ensure private sector employees can enjoy the benefits of insurance and secure their loved ones financially.

EDLI (Employees Deposit Linked Insurance Scheme) insurance cover is provided by EPFO (Employees Provident Fund Organisation). It is especially meant for private sector salaried individuals. In case of an eventuality during the active service period of the individual, the nominee will get a lump-sum insurance pay-out.

EDLI is mandatory for all organisations which are registered under the Employees Provident Fund and Miscellaneous Provisions Act, 1952. The government has made it compulsory for such organisations to subscribe under this scheme so as to give the benefit of life insurance to its employees. This scheme works alongside EPF and EPS. The benefit under the scheme depends on the remuneration paid to the employee.

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Features of Employees Deposit Linked Insurance Scheme

Below are some of the essential features of EDLI which are applicable to all beneficiaries that come under the scope of the policy:

  • All employees who get a basic salary under INR 15,000 per month are eligible for EDLI scheme. The maximum benefit is limited to INR 6,00,000 of the basic salary, if it exceeds INR 15,000.
  • There are no exclusions under the insurance coverage offered in EDLI.
  • Employees only need to contribute towards EPF and do not require to make a contribution to EDLI.
  • A bonus of INR. 1,50,000 is available under the EDLI scheme.
  • If an organisation has more than 20 employees, it becomes mandatory for them to register for EPF. Any employee who has EPF account gets eligible for EDLI scheme by default.
  • EDLI provides comprehensive insurance coverage round the clock and all round the world for the registered employee.
  • Employer has the option to go for other group insurance schemes as well, but the benefit must be more or equal to the offerings under EDLI.
  • The contribution of the employer has been made mandatory of 0.5% of the basic salary or maximum of INR 75 per employee per month. If the employer does not have any group insurance in place, then the maximum contribution is limited to INR 15,000 per month.
  • DA allowance needs to be added to the basic salary for all calculations under EDLI.
  • The nominee mentioned in the document will get the lumpsum amount if the insured person dies during active service term. If the nominee is not available or not mentioned, then the proceeds will be given to the eligible legal heir.

Contributions to the EDLI Scheme

The contribution of the EDLI scheme is made by the Employer on behalf of the employees. The employee does not need to make any contribution to the EDLI scheme. However, for other schemes operated by the EPF, the employer deducts the contribution amount before the salary is paid.

The employee’s contribution is calculated as under:

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

The Employer’s contribution is calculated as under:

  • For EPF – 12% – EPS contribution
  • For EPS – 8.33% or INR. 1,250
  • For EDLI – 0.50 or max INR. 75

The primary objective of the EDLI scheme is to offer financial security to the dependent family members of the employee, in case of an untimely death of the policyholder. Family members include spouse, unmarried female or male child up to the age limit of 25 years. It is not up to the employee to select which of the three schemes, EPF, EPS or EDLI he/she wants to go for, but the schemes will continue even if the employee changes job. The contribution will be made by the new employer in the existing account only.

Calculation of EDLI Charge

In case of the death of the insured person/employee, the death benefit lump-sum will be paid to the registered nominee mentioned in the document. If no beneficiary or nominee name is mentioned, then the proceeds will be given to the next eligible legal heir. The death benefit pay-out to be given to the nominee will be calculated as under:

{Average Monthly remuneration/salary of the insured Employee for the last 12 months (limited to INR 15,000/- p.m.) x 30} + Bonus Amount (INR. 1,50,000)

Therefore, the maximum amount to be paid under EDLI scheme is capped at INR. 6,00,000.

How to Claim the Benefits under EDLI

The procedure to be followed by the beneficiary or nominee to receive the death benefit lump sum under EDLI is as follows. The death benefits can only be claimed by the beneficiary specified by the insured person. If no beneficiary is registered, then the next eligible legal heir or family member can apply for the insured amount.

The insured individual or the deceased person should have been an active member/ contributor to the EPF scheme during the period of his/her death.

The claimant needs to duly fill and submit EDLI Form 5.

The employer will need to sign and certify the claim form.

If is not possible to take signature or certify the claim form from the employer, the claimant can attest the form by any of the following

  • The bank manager in whose branch the account was maintained and active.
  • Local MLA or MP
  • Authorised Gazetted Officer
  • Magistrate
  • Authorised Member/Chairman/Secretary of the Local Municipal Board
  • Sub-Postmaster or Post Master
  • Member of the regional committee of CBT or EPF

The claim form along with all required documents need to be submitted to the regional EPF Commissioner’s Office in order to process the claim.

The beneficiary can also submit Form 20 (EPF withdrawal claim) as well as Form 10C/D to claim all the benefits valid under the three schemes EPS, EPF and EDLI.

Any other additional documents required to support the claim must be furnished at the earliest to avoid any delay in claim process. On receipt of all the required documents, the EPF commissioner is required to settle the claim within 30 days of the receipt of all documents, along with claim form. In case of delay, the beneficiary will get interest of 12% p.a. on the compensation till the date of release of death benefit amount.

Documents Required for a pay-out under EDLI

The claimant needs to submit the following documents in order to successfully file a claim.

  • Form 5
  • Certificate of death of the EDLI member
  • Guardianship Certificate: If the claimant is a minor family member, then the legal guardian is required to submit the guardianship certificate.
  • Succession certificate- This is required if the legal heir is making the claim in case of nominee was not mentioned by the deceased.
  • Cancelled cheque: To give account details of the beneficiary in which the lump sum death benefit claim amount needs to be deposited, a cancelled cheque is required.
  • In the instance the members were previously employed under an organisation which was exempted under the EPF Scheme 1952, the employer of such organisation will need to furnish the PF details of last 12 months under the Certificate part and will also be required to send an attested copy of the Member’s Nomination Form.

FAQs on Employees Deposit Linked Insurance Scheme

How do I claim EDLI benefits?

The EDLI benefit can be claimed only by the nominee mentioned in the document. If the deceased person did not write the name of nominee, then the next eligible legal heir will be able to claim the amount. It is to be noted that in the case of surviving family member, a claim cannot be made by the oldest son or the married daughters whose spouses are still alive. If the nominee or surviving family member is a minor, the claim can be made by the legal guardian by submitting the guardian certificate. The claim form 5 can be downloaded from the www.epfindia.gov.in website. The form needs to be duly filled and submitted with the required documents supporting the claim. The claim will be eligible and accepted if the insured person was actively contributing until the date of his/her death. The employer of the deceased will need to attest the claim form for verification purpose. In order to claim other benefits under the scheme, form 20, form 10C and form 10D can be downloaded, filled and submitted. The forms need to be filled in capital letters and a cancelled cheque needs to be submitted along with the other documents so the benefit amount can be transferred to the nominee’s bank account.

How is EDLI calculated?

The EDLI is calculated as per the below formula

{Average Monthly remuneration/salary of the insured Employee for the last 12 months (limited to INR 15,000/- p.m.) x 30} + Bonus Amount (INR. 1,50,000).

Is EDLI compulsory?

The government has made it compulsory for every employee who earns a monthly basic salary of INR 6500 and above to enrol in EPS and EPF. Employees' Deposit-linked Insurance (EDLI) gives a default life insurance scheme which is provided by Employees' Provident Fund Organization (EPFO).

What is EDLI?

EDLI is Employee Deposit Linked Scheme. It is an insurance coverage scheme given to the employees of the organised sector. It secures the family members of the employee financially, in case of the untimely death of the employee during the active term of his/her job. The EDLI scheme is similar to group life insurance policy, but the amount of benefit is dependent on the employee’s current salary.

What are EDLI charges in provident fund?

There are no EDLI administration charges applicable in provident fund with effect from 1st April, 2017.

What is EDLI contribution?

Employees do not have to contribute directly to the EDLI (Employees' Deposit-linked Insurance) scheme. The employer is responsible to make the contributions on behalf of the employee. The contribution of 0.5% of the basic salary by the employer has been made mandatory, or maximum of INR 75 per employee per month.

What is EDLI scheme in PF?

The Employees' Deposit Linked Insurance Scheme (EDLI) is basically aimed at providing an insurance coverage to the employees of the organised sector. The scheme comes under the Employees' Provident Fund Organization (EPFO). The nominee or legal heir registered by the active member of EPFO will receive a lump sum payment of up to INR 6 Lakhs in case of death of the member during the active term of the service.

What are EE and ER in EPF?

EE stands for Employee Contribution amount which the total contribution of the employee in the EPF accounts. It is the total sum of PF amount taken monthly from your salary. ER stands for Employer Contribution which is the total sum of your company contribution towards your PF.

What is EPF, EPS, EDLI?

EPF (are Employee's Provident Fund), EPS (Employee's Pension Scheme) and EDLI (Employee's Deposit Linked Insurance Scheme) are the three saving and insurance benefit schemes offered by the government run Employees Provident Fund Organisation or EPFO.

What is the meaning of EDLI?

Employee's Deposit Linked Insurance Scheme, 1976 is an insurance scheme for employees who join the Employees' Provident Fund. EDLI provides financial security to the family members of the employee covered under this scheme. If the insured person dies, then a lump-sum amount is paid to the nominee or legal heir under the scheme.

What is the use of EDLI?

EDLI provides monetary benefit, also known as assurance benefit, to the dependent family members in case of the sudden death of the employee. The scheme ensures the dependent family members do not face a financial crises, if the breadwinner of the family passes away unexpectedly.

Are the organisations which are exempted under the EPF Scheme 1952 required to announce the EPF Wages?

Yes, the EPF wages have to be announced as those wages will be taken into account for Inspection charges. Also, if the wages are shown as 0, then the EPS wages cannot be entered as the validation has been put that the EPS wages cannot be more than EPF Wages.