Team AckoOct 4, 2023
Employees’ Deposit-linked Insurance Scheme (EDLI) is yet another way to ensure financial security for the employees. In this article, we'll dive deep into the specifics of the scheme, including how the insurance amount is calculated and who is eligible for the scheme. So, if you're a member of the EDLI, or if you're simply interested in learning more about the scheme and how it can benefit you and your loved ones, then read on!
The Employees Deposit Linked Insurance Scheme is a life insurance scheme introduced by the Employees' Provident Fund Organisation (EPFO). The scheme provides life insurance coverage to employees who are members of the EPF (Employee Provident Fund) scheme. The coverage amount is linked to the employee's PF contributions, and the employer pays the premium for the insurance. The coverage amount under the EDLI scheme is determined as follows.
If the employee's average monthly PF contribution during the preceding 12 months is up to Rs. 5,000, the coverage amount is equal to 30 times the employee's average monthly PF contribution. In addition a bonus of Rs. 2,50,000 is also added to the final amount.
Suppose the employee's average monthly PF contribution during the preceding 12 months is more than Rs. 5,000. Then, the coverage amount is equal to Rs. 2,50,000 (bonus) plus 20 times the amount by which the employee's average monthly PF contribution exceeds Rs. 5,000.
The EDLI scheme is available to organisations that are eligible for EPF. Along with the contribution to the EPF account, employers also contribute to the EDLI scheme every month. The charges for EDLI in the PF account are calculated as follows.
12% of the basic salary and dearness allowance to the EPF account.
12% of the employee's basic salary and dearness allowance, which is divided as follows.
3.67% to the EPF account
8.33%, up to a maximum of Rs.1,250, to the EPS (Employee Pension Scheme)
0.50%, up to a maximum of Rs. 75, to the EDLI account
Employers can also choose to offer a Group Life Insurance Scheme for their employees. In this case, the coverage should be equal to or greater than that provided by the EDLI scheme.
Employers have the option to opt-out of the EDLI scheme, but if they don't offer a group life insurance scheme, they can contribute up to Rs. 15,000 per month towards the EDLI scheme.
Once the EDLI scheme is in effect, it provides coverage in case of premature death. If an employee passes away while they are a member of the EDLI scheme, their family receives a lump sum financial benefit to compensate for the loss.
To be eligible for the Employees' Deposit Linked Insurance (EDLI) scheme, employees must meet the following criteria.
Organisations with more than 20 employees are required to subscribe to the EDLI scheme.
Employees who earn a basic salary of up to Rs. 15,000 per month can enrol in this scheme. If an employee earns a salary exceeding Rs. 15,000, the maximum benefit payable under the scheme would be capped at Rs. 6 lakhs.
Here are the features of EDLI.
In the event of a claim, the employee will receive a bonus of up to Rs. 2,50,000, which will be paid simultaneously with the claim amount. The amount of coverage is directly proportional to the employee's salary, ensuring that the scheme is accessible to employees of all levels.
The premium payable is the same for all employees, irrespective of age or any other individual factors. This means that every employee is eligible for coverage under the EDLI scheme, regardless of age or other personal circumstances. Furthermore, the contribution towards the scheme is only 0.50% of the employee's salary and is paid by the employer.
The employer is responsible for making payments to the Provident Fund Authorities for the scheme. However, it is worth noting that under Section 17 (2A) of the Act, the employer can choose to stop contributing to the EDLI scheme if they have already opted for a better employee insurance policy under a different scheme.
The Employees Deposit Linked Insurance Scheme provides several benefits to employees who are members of the EPF scheme. Some of the advantages of the scheme are as follows.
The scheme provides life insurance coverage to employees in case of unfortunate events such as death or disability.
The employer pays the premium for the insurance, and the coverage amount is linked to the employee's PF contributions.
The coverage amount under the EDLI scheme can be up to a maximum of Rs. 7,00,000, and the minimum coverage amount is Rs. 2,50,000.
The scheme is available to all employees who are members of the EPF scheme, irrespective of their salary or designation.
To ensure a hassle-free and successful filing of a claim under the EDLI (Employee Deposit Linked Insurance) scheme, the claimant must submit the following mandatory documents along with the claim forms.
Death certificate: This certificate validates the demise of the EDLI member. It is essential to provide this document to establish the cause of death and ensure the claim is genuine.
Guardianship certificate: The legal guardian must submit a guardianship certificate if a guardian is making a claim on behalf of a family member who is below 18 years. It serves as legal evidence of the claimant's connection to the minor.
Succession certificate: A succession certificate is required if a legal heir of the deceased files the claim. It is a legal document that proves the claimant's entitlement to the deceased member's assets.
Cancelled cheque: A cancelled cheque of the claimant's bank account must also be submitted in which the claim funds are to be deposited. It is necessary to ensure that the funds are deposited in the correct account and avoid any fraudulent activities.
Submitting the above documents is mandatory for filing a claim under the EDLI scheme. Any delay or lack of documentation may result in the rejection of the claim.
Upon the demise of a member, their heirs are entitled to an insurance payout. This sum is determined by multiplying 30 with the average monthly salary received during the last 12 months of employment. It's worth noting that the maximum salary considered for this calculation is up to Rs. 5,000 per month.
To give an example, if the employee's average monthly salary during their final year of service was Rs. 5,000, then their nominees would receive Rs. 1,50,000 as the insurance payout. However, the scheme also provides a bonus amount to the claimant. This bonus can be as much as Rs. 2,50,000, bringing the total amount payable to the beneficiary to Rs. 4,00,000.
Here is a quick look at the calculations.
Salary per month
No. of years to be multiplied
(5,000*30) + 2,50,000 = 4,00,000
Notify the employer or the establishment about the employee's demise. They will provide you with the necessary forms and guidance.
Fill Out the Form: Complete Form 5(IF) provided by the EPFO (Employees' Provident Fund Organization). This form requires details like the deceased employee's personal information, PF account number, nominee's details, and a canceled cheque with the nominee's or legal heir's name printed on it.
Attach Required Documents: Gather and attach the necessary documents, including:
Death certificate of the deceased employee.
Nominee's or legal heir's photo ID proof (Aadhar card, PAN card, passport, etc.).
Proof of relationship between the nominee and the deceased (if required).
Bank account details of the nominee or legal heir for fund transfer.
Submit the Form: Submit the completed Form 5(IF) along with the supporting documents to the employer or the EPF office.
Employer Verification: If the employer is handling the claim process, they will verify the details and forward the documents to the EPF office.
EPF Office Processing: The EPF office will review the application and documents. They will verify the claimant's identity and the accuracy of the information provided.
Claim Approval: Once the EPF office approves the claim, the EDLI benefits, including the insurance amount and the employee's provident fund balance, will be processed.
Benefit Disbursement: The approved benefits will be disbursed to the nominee or legal heir's bank account through electronic funds transfer (EFT).
Confirmation: You will receive confirmation of the disbursement, and the process is complete.
It's important to initiate the EDLI claim process promptly after the employee's demise to ensure timely benefits for the nominee or legal heir.
Employee Contribution: Typically, the employee contributes 12% of their basic salary and dearness allowance (if applicable) to the EPF account.
Employer Contribution: The employer also contributes 12% of the employee's basic salary and dearness allowance (if applicable) to the EPF account. Out of this 12%, 3.67% goes to the employee's EPF account, and the remaining 8.33% goes to the employee's EPS account, capped at a certain salary limit.
Employee Contribution: Employees do not make direct contributions to the EPS. Instead, a portion of the employer's contribution (8.33% of the basic salary and dearness allowance) goes to the EPS account on behalf of the employee.
Employer Contribution: The employer contributes 8.33% of the employee's basic salary and dearness allowance (capped at a specified limit) directly to the EPS account. This contribution provides a pension benefit to the employee upon retirement or in certain other qualifying circumstances.
Employee Contribution: There is no separate contribution made by the employee to the EDLI scheme. It is primarily funded by the employer.
Employer Contribution: The employer contributes 0.5% of the employee's total basic salary, dearness allowance, and retaining allowance (subject to a maximum amount) to the EDLI fund. This contribution provides life insurance coverage to the employee's nominee or legal heirs in case of the employee's demise while in service.
The EDLI (Employees' Deposit Linked Insurance) Form 5 IF is a crucial document used to claim benefits under the EDLI scheme. It is essentially required when an employee covered under the EPF (Employees' Provident Fund) passes away while in service. Here's a breakdown of the key information regarding Form 5 IF:
What does it do?
Form 5 IF is used to claim the insurance benefits provided by the EDLI scheme in the event of the employee's demise.
Who Can Fill Out the Form?
The nominee or legal heir of the deceased employee.
The employer can also assist in filling out the form if they are facilitating the claim process.
Information Needed in Form 5 IF:
Details of the deceased employee, including their name, EPF account number, and establishment details.
Particulars of the nominee or legal heir, including their name, relationship with the deceased, and contact information.
Bank account details of the nominee or legal heir for funds transfer.
A canceled cheque with the nominee's or legal heir's name printed on it.
A copy of the deceased employee's death certificate.
Submission of Form 5 IF:
The completed Form 5 IF, along with all the required documents, should be submitted to the employer or the EPF office.
Processing and Approval:
The EPF office will review the form and documents to ensure accuracy and eligibility.
Once approved, the EDLI benefits will be processed for disbursement.
The approved benefits, which include the insurance amount, will be disbursed to the nominee or legal heir's bank account through electronic funds transfer (EFT).
It's essential to initiate the EDLI claim process promptly after the employee's demise to ensure timely benefits for the nominee or legal heir.
Form 5 IF simplifies the process of claiming EDLI benefits and ensures that the eligible beneficiary receives the insurance amount in the unfortunate event of the employee's death during service.
The EDLI is administered by the Employees' Provident Fund Organisation (EPFO).
In case of the employee's death, the EDLI coverage amount is paid to the nominee(s) of the employee.
No, an employee cannot opt for a higher coverage amount under the EDLI as it is a fixed amount based on the employee's basic wages, dearness allowance, and retaining allowance (if any).
No, there is no age limit for availing the EDLI benefits.
Employees can check their EDLI coverage amount in their EPF passbook or by logging in to the EPFO member portal.
Yes, there are certain exclusions to the EDLI coverage, such as death due to suicide, intoxication, or participation in hazardous activities.
Yes, an employee can make a nominee change for the EDLI by filling out the necessary forms and submitting them to the EPFO.
No, there is no waiting period for the EDLI coverage, and it is effective from the date of the employee's joining the EPF.
In case of the employee's death, the nominee(s) can claim the EDLI coverage amount by submitting the necessary documents to the EPFO.
Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on industry experience and several secondary sources on the internet, and is subject to changes.
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