EDLI or Employee Deposit Linked Insurance is an added benefit available with the Provident Fund (PF) or more accurately, Employee Provident Fund (EPF). EPF is a retirement saving scheme wherein you and your employer deposit a portion of your basic salary each month.
You contribute 12% of your basic salary to the PF account, whereas your employer contributes 3.67%. Your employer also contributes 8.33% to Employees Pension Scheme (EPS) to help you or your family receive a pension. What’s more, when you are enrolled for EPF and EPS, you are automatically covered under the Employees Deposit Linked Insurance Scheme (EDLI).
What is EDLI Scheme?
The Employee Provident Fund Organisation (EPFO) offers insurance cover, under the Employees Deposit Linked Insurance Scheme (EDLI), if you work in the private sector. Your nominee is eligible to receive insurance benefits, provided you meet the following eligibility criteria:
- You and your employer should be contributing a minimum of 24% to EPF and EPS
- All contributions (including yours) should be made by your employer
- You work in the private sector
- Your basic salary is Rs 15,000 or below
EDLI, which is under the Employees’ Provident Fund and Miscellaneous Provisions Act (EPF and MP Act), 1952, was launched in 1976 and covers employers who provide EPF provisions to their employees. EDLI offers life insurance coverage to employees.
- The claim amount under ELDI is limited to 35 times the average monthly salary and capped at Rs.6lakhs. With effect from April 2021, the maximum benefit has been revised upward to Rs.7lakhs.
- There is a provision for paying out a bonus of Rs 1.5 lakhs to the claimant. This amount has also been subsequently revised to Rs 2.5 lakhs.
EDLI Through EPF Contribution
EDLI works with EPF and the benefit under the scheme depends on your last drawn basic salary.
- EPF - 12%
- EPS - 0
- EDLI - 0
Your employer’s contribution:
- EPF - 3.67%
- EPS - 8.33% or Rs 1,250 whichever is lower
- EDLI - 0.50% or Rs 75 whichever is lower
You may estimate the pay out in EDLI using the following formula:
Your average monthly basic salary for the last 12 months (capped at Rs 15,000 per month) * 30] + Rs 2,50,000 (Bonus Amount)
Features of Employee Deposit Linked Insurance
Insurance mitigates risk and offers financial support to the family. The government, in 1976, introduced EDLI for private-sector employees. The primary objective of EDLI is to provide financial security to the account holder’s family. In case of untimely, unfortunate, demise, the EDLI saving scheme offers financial support to the nominee. Following are the highlights of EDLI:
- The claim amount offered is 30 times the basic salary.
- The maximum benefit is Rs 7 lakhs
- The bonus offered is Rs 2.5 lakhs
- If your employer has 20+ employees on the payroll, the organization has to mandatorily register for EPF. This implies you are automatically eligible for EDLI
- There are no exclusions in EDLI. Your coverage is comprehensive to the extent of sum assured
- EDLI considers basic + Dearness Allowance (DA) if your salary structure has a DA component.
- In the case of a claim, the sum assured is directly transferred to the nominee’s account.
- Age does not impact EDLI eligibility
- As per Section 17(2A) of the Employees Provident Fund Act, your employer can opt out of the EDLI, if the organization has better life insurance coverage for its employees.
How to Claim EDLI Benefit?
The process to receive the claim amount is listed below. The nominee/claimant should follow the same:
a) Fill Form 5IF
b) Get the claim form signed and certified by the employer
c) Form20 can also be submitted to withdraw money from the EPF account
d) Form 10C/10D can also be submitted to avail of a pension benefit or withdraw from the EPS account
For processing the EDLI claim, the following documents are required:
a) Form 5 IF
b) Death certificate
c) Succession Certificate
d) A cancelled cheque of the account to which the claim amount should be transferred.
EDLI is a unique insurance scheme that provides a risk cover for being a subscriber of EPF. There is no additional premium to be paid to avail of this cover. However, EDLI offers only a very basic financial safety for your family. As your income grows, you should include a separate term insurance plan in your folio. The maximum claim permissible under this scheme is Rs 7 lakhs. As a thumb rule, you should have life insurance cover at least 10 times your annual income. Thus, while EDLI benefits may be there it does not offer adequate financial safety to your family in your absence.
If your basic salary is ~Rs 15,000 and your gross salary is ~Rs 30,000 your life insurance cover should be approximately Rs 40 lakhs. Plan accordingly. Also, while the EDLI benefit is capped at a salary of Rs 15,000, your family’s lifestyle will be based on much more.
Term life cover of 10-15 times your annual income, is sufficient to take care of your family’s financial needs in your absence.
So, what are you waiting for? Explore your options under term life cover and give adequate long-term financial protection to your loved ones.Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised to exercise their caution and not to rely on the contents of the article as conclusive in nature. Readers should research further or consult an expert in this regard.