EDLI – Employees Deposit Linked Insurance Scheme

Employees’ Deposit Linked Insurance (EDLI) Scheme offers life insurance cover to EPF members, providing financial support to their family in case of death.
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3 min
16-March-2024

The Employees Deposit Linked Insurance Scheme (EDLI) is an insurance plan that was launched by the Government in 1976. This scheme was launched with the objective of providing social security benefits to private sector employees, for whom such benefits were not commonly provided by the employer. Today, the EDLI scheme is managed and administered by the Employees Provident Fund Organisation, offering term life insurance cover.

What is EDLI scheme?

EDLI is an insurance plan offered by the Employees Provident Fund Organisation (EPFO) specifically for private sector salaried employees who are EPFO members. Introduced in 1976, the scheme provides a lump-sum payment to the registered nominee if the insured employee passes away while still employed.

The EDLI scheme applies to all organisations registered under the Employees' Provident Fund and Miscellaneous Provisions Act of 1952. These organisations must participate in the scheme to provide life insurance coverage for their employees. It's important to note that the EDLI scheme functions alongside the Employees' Provident Fund (EPF) and the Employees' Pension Scheme (EPS).

It is important to remember that EDLI is an insurance product, focused on protection in the event of an employee's death.

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How does the EDLI scheme work?

Organisations that qualify for the Employees' Provident Fund (EPF) automatically become eligible for EDLI policy. Every month, your employer contributes to the EDLI scheme alongside their regular EPF contributions. Here's how their contribution is divided:

  • Employee contribution: 12% of your basic salary + dearness allowance goes to your EPF account.
  • Employer contribution: 12% of your basic salary + dearness allowance, divided as follows:
    • 3.67% to your EPF Account
    • 8.33% to the EPS (Employees' Pension Scheme), capped at a maximum of Rs. 1,250
    • 0.50% to the EDLI Account, capped at a maximum of Rs. 75

Employers have options when it comes to providing life insurance for their employees. They can choose a group life insurance plan as an alternative to EDLI, as long as the coverage amount is at least equal to the EDLI benefit. Additionally, employers can opt-out of the EDLI scheme altogether. However, if they do not have a separate group life insurance plan, they have the option to increase their EDLI contributions up to a maximum of Rs. 15,000 per month.

Key features of the Employees Deposit Linked Insurance Scheme

Here are some important things to know about EDLI:

  • EDLI contributions are made entirely by your employer, placing no financial burden on employees.
  • As part of the EPF scheme, EDLI automatically covers all employees who have an EPF account.
  • The EDLI scheme provides a lump-sum payment to the registered nominee in the event of the insured employee's death during service. This death can occur anytime and anywhere for the benefit to be claimed.

What is the eligibility criteria for EDLI Scheme

Understanding the eligibility rules is important before expecting coverage under the EDLI Scheme. This scheme mainly covers employees enrolled under EPF. The criteria below explain who qualifies and under what employment conditions benefits become applicable.

Documents required to payout under EDLI

To ensure a smooth EDLI claim, submitting the correct documents is essential. Proper paperwork helps nominees or legal heirs receive the benefit amount without unnecessary delays. Generally, claim forms, death certificate, identity proof of the nominee, bank details, and employer certification are required. In some cases, additional documents such as succession certificates may be requested. Keeping employment and nomination records updated makes the EDLI claim process faster and more convenient for family members.

Key benefits of EDLI scheme

The EDLI scheme provides financial protection to employees’ families in case of an untimely demise during service. It works alongside EPF and offers valuable support without requiring separate premium payments from employees.

Some key benefits include:

  • Financial security for family: Provides a lump sum payout to nominees, helping them manage immediate expenses and maintain financial stability.
  • No separate premium burden: Employees are automatically covered under the EDLI scheme through employer contributions, without additional cost.
  • Linked with EPF membership: Coverage is available as long as the employee is actively enrolled under EPF, ensuring continuous protection.
  • Simple claim process: With proper documentation and employer support, nominees can complete the claim process efficiently.

Overall, the EDLI scheme strengthens employee benefits by offering an additional layer of financial protection.Top of Form

How the EDLI benefit is calculated

The EDLI scheme provides a payout upon the death of an insured employee. Here's how EDLI policy benefit is determined:

1. Base calculation: The benefit starts with 30 times the average monthly salary the employee earned in the 12 months before their death. This amount is capped at a maximum of Rs. 15,000.

2. Bonus: An additional bonus of Rs. 2.5 lakhs (increased from Rs. 1.5 lakhs in September 2020) is added to the benefit.

  • Let say your salary is above Rs. 15,000
    If an employee earned more than Rs. 15,000 per month, the maximum base amount (30 * 15,000) is used, resulting in a benefit of Rs. 450,000 + Rs. 2,50,000 bonus = Rs. 7 lakh.
  • Let say your salary is below Rs. 15,000
    If an employee earned Rs. 10,000 per month, the calculation is (30 * 10,000) + Rs. 2,50,000 bonus = Rs. 5.5 lakh.

What is the calculation of EDLI charge?

The EDLI Charge is calculated as a percentage of an employee’s monthly basic salary plus dearness allowance. Under the scheme, employers contribute 0.5% of the employee’s wages (subject to the prescribed wage ceiling). There is also a small administrative charge applicable, as notified by authorities from time to time.

Importantly, employees do not pay this amount directly — the employer bears the EDLI Charge as part of statutory EPF contributions. The calculation is done monthly and deposited along with other provident fund contributions to ensure continuous coverage under the EDLI scheme.

How to claim EDLI benefits

Here is the process for receiving the EDLI payout:

  • The benefit can be claimed by the employee's registered nominee. If no nominee exists, family members or legal heirs can apply.
  • The deceased employee must have been actively contributing to the EPF scheme at the time of their death.
  • Download and fill out EDLI Form 5 IFcto initiate your claim.
  • Your claim form must be signed and certified by your employer.
  • If your employer is unavailable or unable to sign, you can have the form attested by any of the following:
    • Bank manager (of the branch where the deceased held an account)
    • Local MP or MLA
    • Gazetted Officer
    • Magistrate
    • A member, chairman, or secretary of a local municipal board
    • Postmaster or sub-postmaster
    • Member of a regional committee of EPF or CBT
  • Submit the completed EDLI claim form (Form 5 IF), along with any required supporting documents, to the regional EPF Commissioner's Office.
  • You can also submit Forms 20 (for EPF withdrawal) and 10C/D (for EPS withdrawal). This allows you to claim benefits from all three schemes (EPF, EPS, and EDLI) at once.
  • Submit any additional documents requested by the EPF office, to speed up the claim process.
  • Once approved, the EPF commissioner has 30 days to release the payment. If payment is delayed, the claimant is entitled to 12% annual interest until the funds are disbursed.

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Conclusion

The EDLI scheme is a valuable safety net for families of private-sector employees. Its automatic inclusion with the EPF offers peace of mind, knowing that financial support will be provided in the event of an employee's death. It is essential for employees and their families to understand the EDLI benefits, eligibility requirements, and the steps involved in making a claim.

Frequently asked questions

What does the EDLI pension scheme mean?

The EDLI scheme is a group life insurance cover linked with EPF. It provides a lump-sum payout to an employee’s nominee in case of death during active service.

What is the process to claim EDLI benefits after death?

To claim EDLI, the nominee or legal heir must submit the EDLI claim form, death certificate, bank details, and employer verification to the EPFO office.

What is the maximum benefit payable under EDLI?

The maximum EDLI benefit amount is capped as per EPFO rules and is calculated based on the employee’s last drawn salary, subject to the prescribed wage ceiling.

Who can get coverage under the EDLI scheme?

Employees who are active members of EPF are automatically eligible for EDLI coverage. No separate enrolment or premium payment is required from employees.

How is EDLI different from other insurance plans?

EDLI is a statutory, employer-funded group insurance linked to EPF, while other insurance plans are voluntary, premium-based, and offer flexible coverage options.

How can an employer obtain an EDLI exemption certificate?

Employers can apply for an EDLI exemption certificate if they offer an alternative group insurance scheme providing equal or better benefits, subject to EPFO approval.

What is the difference between EDLI and EPF?

EPF is a retirement savings scheme for employees, whereas EDLI provides life insurance coverage and pays benefits only in case of the employee’s death.

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