The Government introduced the Employees Deposit Linked Insurance Scheme (EDLI) in 1976 to offer social security benefits to private sector employees who did not receive them from their employers.
The scheme, now managed by the Employees Provident Fund Organisation (EPFO), provides term life insurance cover for member employees. Its main objective is to provide security to private sector employees and their families in case of a member's death.
This blog discusses the EDLI meaning, what is EDLI, EDLI full form, features, benefits, eligibility and the claim process.
How does the EDLI scheme work?
EPF-eligible organisations also qualify for EDLI, with employers contributing to the scheme monthly when contributing to the EPF account. The EDLI charges in PF are as follows.
● The employee's contribution is 12% of the basic salary + Dearness Allowance for the EPF account.
● The employer contributes 12% of the employee's basic salary + dearness allowance.
This is apportioned as 3.67% to the EPF account, 8.33% (up to a maximum of Rs.1250) to the EPS (Employees' Pension Scheme), and 0.50% (up to a maximum of Rs.75) to the EDLI account.
Alternatively, employers can purchase group life insurance for their employees. In such a case, group life insurance coverage should be equal to or greater than EDLI coverage. Additionally, employers have the option of opting out of the EDLI program.
When the employer chooses not to offer a group life insurance plan, they can increase the EDLI contribution limit. Employers can contribute up to the EDLI scheme up to Rs. 15,000 per month without a group life insurance plan for employees.
Once the EDLI scheme is applicable, it covers the risk of premature death. If an employee dies while being a member of the EDLI scheme, their family receives a lump sum financial benefit to compensate for their financial loss. This scheme provides employees with financial protection and ensures their families are cared for in the event of an untimely death.
Features of Employees Deposit Linked Insurance Scheme
The EDLI scheme has the following key characteristics.
● The employer contributes to the scheme, and there is no contribution required from the employee, making it free for all employees.
● As part of the Employees Provident Fund, the scheme covers all employees with an EPF account.
● The scheme offers coverage for the premature death of the insured employee, irrespective of the time and place of death.
Benefits paid by the EDLI scheme
Under the EDLI calculation, the coverage paid on an employee's death is 30 times the average monthly salary earned in the 12 months preceding their death, subject to a maximum of Rs. 15,000. Additionally, a bonus of Rs. 2.5 lakhs (increased from Rs. 1.5 lakhs as of September 2020) is paid along with the coverage.
For instance, if an employee's salary is above Rs. 15,000, the total benefit payable would be Rs. 7 lakhs, calculated as follows: (30*15000) + 150,000 = Rs. 7 lakhs.
On the other hand, if an employee's salary is below Rs. 15,000, such as Rs. 10,000, the EDLI benefit would be Rs. 5.5 lakhs, calculated as follows: (30*10000) + 250000 = Rs. 5.5 lakhs.
How to claim EDLI?
If an employee passes away as a member of EDLI, the legal heirs or nominee gets the scheme's benefits. To receive the benefit, the nominee must follow the steps given below.
● Claimees/claimants should complete and submit Form 5IF.
● An employer must sign and certify that the employee was a member of the EPF scheme. In the case of no employer or an unavailable employer, the form must be attested by authorised individuals, such as
● The local MLA or MP
● Manager of the bank where the employee had their bank account
● A gazetted officer
● A post-master or sub-postmaster
● Member of EPF, CBT or any regional committee
● Claimees/claimants should submit Form 20 to withdraw their EPF, Form 10C/D to claim benefits from all employee benefit schemes, and other documents to the regional EPF Commissioners Office.
● In 30 days, the EPF commissioner will verify the submitted documents and pay the claim.
● Interest will be charged on delayed claims if not filed within the specified deadline. 12% interest will be calculated for each day the claim is delayed until paid.
EDLI Scheme Eligibility
To qualify for EDLI coverage and enrollment, employees must meet the following criteria.
● This scheme is available to employees earning up to Rs. 15,000 per month. The maximum benefit of the cover is Rs. 6 lakhs if the employee's salary exceeds Rs. 15,000.
● To participate in the EDLI scheme, organisations with more than 20 employees need to apply.
Documents required for EDLI claim
Nominees or legal heirs of the employee must submit the following documents along with the specified forms to make a claim.
● Employee's death certificate
● In the case of a legal heir claiming the inheritance, a succession certificate is required.
● If an individual other than the natural guardian claims on behalf of a minor, they must submit a guardianship certificate.
● Copy of cancelled check for the bank account to be credited with the claim.
Benefits of EDLI insurance
Here are the benefits of EDLI insurance.
● Offers financial protection to the family members of the deceased employee in case of premature death
● The scheme is free for employees as the employer makes the contributions
● EDLI is a part of the Employees Provident Fund and hence, covers all employees who have an EPF account
● The benefit payable under the scheme is calculated as 30 times the average monthly salary drawn by the employee over the last 12 months preceding the date of death, subject to a maximum of Rs. 15,000
● A bonus of Rs. 2.5 lakhs is also paid in addition to the coverage
● The claim process is simple, and the claim is typically paid within 30 days of the submission of the necessary documents
● The scheme would pay the employee's family the death benefit even if the employee died abroad
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Frequently Asked Questions
Family members, legal heirs, or nominees of the applicant may claim benefits.
EDLI benefits are available without a minimum service period.
A bonus of Rs. 1.5 lakh was payable under the EDLI scheme until September 2020. With effect from September 2020, the government increased the amount to Rs. 2.5 lakh.
You can exit the scheme by taking up a higher-paying employee-life insurance policy under Section 17 (2A).
No, you have to fill it out offline.