Employees Deposit-linked Insurance Scheme: Eligibility, Features, and Benefits

Posted on: Aug 4, 2023 | | Written by:

Employees Deposit-linked Insurance Scheme: Eligibility, Features, and Benefits

Published on August 03, 2023. EST READ TIME: 3 minutes

We are mostly unaware of the uncertainties that lie ahead and the best we can do is prepare ourselves for them. Sometimes, knowing that you are not alone in the planning can be a huge relief. Do you know that your employer can take proactive steps to safeguard your loved ones' future through the Employees Deposit Linked Insurance Scheme (EDLI)? Well, this initiative introduced by the Employees' Provident Fund Organisation (EPFO) offers a safety net to employees enrolled in the Employee Provident Fund (EPF). Let’s delve deeper into the intricacies of the EDLI scheme, exploring its coverage, benefits, and the essential documents needed for filing a claim.

What is the Employees Deposit Linked Insurance Scheme?

The Employees Deposit Linked Insurance Scheme (EDLI) is a life insurance cover launched by the Government of India for employees of the private sector. The employees must be members of Employees Provident Fund Organisation (EPFO) as EDLI scheme functions in combination with Employees' Pension Scheme (EPS) and EPF. In case of untimely death of the employee, a lump sum compensation will be provided to the nominee. The compensation is based on the last drawn salary of the employee. The EDLI scheme is managed and administered by the EPFO.

How does the Employees Deposit Linked Insurance Scheme work?

An organisation can subscribe to the EDLI scheme only if it is eligible for EPF (Employees’ Provident Fund). The employer makes the contribution to the Employees Deposit Linked Insurance scheme on behalf of its employees. The employee doesn’t directly contribute to this scheme. Here’s how the EDLI scheme works:

• Contribution by employee to EPF account: 12% of the basic salary + dearness allowance

• Contribution by employer: 12% of the basic salary + dearness allowance which is divided as below:

- EPF account – 3.67%

- EPS (Employee Pension Scheme) – 8.33% or maximum Rs 1,250

- EDLI account – 0.05% or maximum Rs 75

Employers can opt out of Employees Deposit Linked Insurance scheme if they choose to offer better life insurance policy to their employees but the coverage should be more than or equal to that provided by EDLI. If the employee meets with an unfortunate death while he/she is a member of EDLI, the family gets a lump sum compensation.

Who is eligible for the Employees Deposit Linked Insurance Scheme?

An employee is eligible for Employees Deposit Linked Insurance scheme if he/she fulfils the below criteria:

• The organisation, where the person is employed, should have more than 20 employees to subscribe for the scheme.

• Basic salary of the employee should be less than Rs 15,000 per month. If the salary exceeds Rs 15,000, the maximum benefit payable under the scheme will be Rs 7 lakh.

Features of Employee Deposit Linked Insurance (EDLI) Scheme

• Employees Deposit Linked Insurance Scheme is applicable to all employees, irrespective of age, whose basic salary is less than Rs 15,000 per month. If the salary exceeds Rs 15,000 per month, the maximum payout is capped at Rs 7 lakh. This means, the nominee or legal heir will get an assured benefit of maximum Rs 7 lakh if the insured dies while in service.

• Contribution to the scheme is made by the employer. However, an employer can stop contributing to Employees Deposit Linked Insurance Scheme if they opt for a better life insurance policy under a different scheme. But the coverage of the life insurance scheme must be equal to or more than that of EDLI scheme.

• The employer’s contribution must be 0.5% of the basic salary or a maximum of Rs. 75 per employee per month.

• A bonus of Rs 2.5 lakh will be paid along with the claim amount to the nominee of the insured.

• To enrol for EDLI scheme, an organisation must have more than 20 employees.

• Those with EPF account are automatically eligible for EDLI scheme.

Advantages of the Employees Deposit Linked Insurance Scheme

The EDLI offers several advantages to employees such as:

• If the insured employee dies while in service, the family members will get free life insurance coverage under the scheme.

• The employer makes a minimal contribution of Rs 75 per month but the maximum assured benefit paid to the nominee is significant, that is, up to Rs 7 lakh. The minimum coverage amount is Rs 2.5 lakh.

• All employees, irrespective of age or designation, are covered. There are no exclusions.

• Even if the employee dies in a foreign country, the family will receive the death benefit.

Documents required to file a claim under EDLI Scheme

To file a claim under EDLI scheme, the following documents have to be submitted by the nominee or legal heir of the employee:

• Duly filled Form 5 IF by the claimant

• Death certificate of the employee to ascertain the cause of death and if the claim is genuine

• Succession certificate if the claim is filed by a legal heir of the deceased employee

• Guardianship certificate if the claim is filed by a legal guardian on behalf of a minor family member of the deceased

• Cancelled cheque of the bank account to which the claim amount will be credited

How to calculate the claim amount of EDLI scheme?

• After the death of the insured member, the nominee or legal heir will receive the payout which is calculated as:

{Average Monthly Salary of the Employee for the last 12 months (capped at Rs.15,000) x 30} + Bonus Amount (Rs.2,50,000) = Rs 7,00,000.

• If an individual’s salary is Rs 10,000 per month, the payout will be:

(10,000*30) + 2,50,000 = Rs 5,50,000.

Frequently asked questions

1. Who will receive the benefits of the EDLI scheme after the employee’s death?

The registered nominee will get the coverage amount if the employee dies while is service. If no nominee is registered, the legal heirs are entitled to receive the benefits.

2. Is there any age limit to avail of EDLI scheme?

No, there’s no age limit. Any employee whose basic salary is less than Rs 15,000 per month is eligible for the scheme.

3. Is there a minimum service required to enrol for EDLI?

No, there’s no minimum service period required to avail of EDLI scheme.

4. Can an employer opt out of EDLI?

An employer can opt out of EDLI scheme if they offer a better life insurance policy for their employees and the coverage amount must be equal to or more than that of EDLI scheme.

5. Is there any waiting period to avail of EDLI scheme?

No. The scheme comes into effect from the date the employee contributes to EPF account.

Conclusion

The Employees Deposit Linked Insurance scheme, provided by the EPFO, boosts the morale of employees by providing financial assistance to family members in the event of the employee’s death during service. If you are a salaried employee working in the private sector and meet the eligibility criteria, you can be rest assured that your loved ones are financially secure when you are not with them. However, it is also advisable to invest in the best health insurance in India for added protection. The Mediclaim policy will provide financial protection in case of any unexpected medical expenses and to enjoy coverage, you have to pay health insurance premium.

Disclaimer: The above information is for illustrative purposes only. For more details, please refer to policy wordings and prospectus before concluding the sales.

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