Last Updated on May 24, 2022 by Anjali Chourasiya

The Government of India has devised various types of employee benefit programs that help employees financially. The Employees Provident Fund (EPF) is one of the primary employee benefit programs that help employees plan for their retirement. The EPF scheme is managed by the Employees Provident Fund Organisation (EPFO). Besides offering the EPF scheme, the EPFO also offers the Employees Deposit Linked Insurance Scheme.

Let’s understand what this scheme is all about.

What is the EDLI scheme?

The Employees Deposit Linked Insurance Scheme (EDLI) is an insurance scheme administered by the EPFO. Introduced in 1976, the EDLI scheme provides life insurance coverage to the employees of the private sector who are covered under the EPF Act. The EDLI scheme forms a part of the EPF scheme itself. 

Under the EPF scheme, if the registered employee dies during the course of his/her employment, the registered nominee is eligible for a lump sum benefit.

Eligibility for the EDLI scheme

The EDLI scheme is applicable to the following organisations and their employees:

  • Organisations with more than 20 employees have to register for the EPF scheme.
  • Organisations eligible under the Employees Provident Fund and Miscellaneous Provisions Act, 1952 and registered with the EPFO have to provide an EDLI scheme to their employees.
  • The basic salary (including the Dearness Allowance) of the employee should be below Rs. 15,000 for calculating the EDLI coverage amount. If the basic salary exceeds Rs. 15,000, the maximum benefit payable is restricted to Rs. 7 lakh.
  • If the company buys a group insurance policy for its employees, the policy’s coverage should be more than or equal to the coverage provided by the EDLI scheme.

Features and benefits of EDLI

Here are some of the salient features and benefits of the EDLI scheme:

  • The amount of benefit paid on death depends on the employee’s last drawn salary. 
  • The EDLI scheme works in tandem with the EPF scheme and the EPS (Employees’ Pension Scheme)
  • A bonus of Rs. 2.5 lakh is also paid to employees’ nominees in the case of an employee’s death.
  • Employees do not have to contribute to the EDLI scheme. Only the employer is required to contribute 0.5% of the employee’s basic salary (including the Dearness Allowance). The maximum monthly contribution is Rs. 75 per employee. However, if the employer does not opt for any group insurance scheme for the employees, the maximum contribution would be limited to Rs. 15,000 per month for each employee. 
  • If the employee is actively employed and dies due to any reason, anywhere in the world, the EDLI benefit would be paid to the registered nominee. The registered nominee would be the same as registered in the EPF account. If there is no registered nominee, the legal heirs will receive the benefit.

Calculation of the death benefit

As stated earlier, the death benefit payable under the EDLI scheme depends on the employee’s last drawn salary. It is calculated using the following formula:

EDLI death benefit = (Average monthly salary of the employee over the last 12 mths before death * 30) + Rs. 2.5 lakh (bonus)

For example, an employee drew Rs. 12,000/mth over the past year before death. In such a case, the EDLI benefit payable would be (Rs. 12,000 * 30) + Rs. 2.5 lakh = Rs. 6.1 lakh

The average monthly salary is limited to Rs. 15,000. So, if the employee’s salary is higher than Rs. 15,000, the maximum limit of Rs. 15,000 would be considered for calculating the EDLI benefit.

For example, say, an employee drew a salary of Rs. 25,000 over the last 12 mths prior to his death. In this case, the EDLI benefit would be calculated as (Rs. 15,000 * 30) + Rs. 2.5 lakh = Rs. 7 lakh.

Thus, even if the salary exceeds Rs. 15,000/mth, the maximum EDLI benefit payable would be restricted to Rs. 7 lakh.

Making a death claim under the EDLI scheme

If the employee expires while being an active member of the EPF scheme, the nominee can claim the EDLI benefits. To make a claim, the nominee should fill up the EDLI Form 5IF. Then, this claim form should be signed and certified by the deceased employee’s employer. If the employer’s signature or certification cannot be availed due to unavoidable reasons, the form can be attested by any of the following individuals:

  • A gazetted officer
  • A local Member of Parliament (MP) or a local Member of Legislative Assembly (MLA)
  • The manager of a bank
  • A magistrate
  • A member of the regional committee of CBT or EPF
  • A postmaster or a sub-postmaster
  • A member, secretary or chairman of the local municipal board

After getting the claim form signed and certified, the nominee should attach the relevant documents for making a claim. These documents include the following:

  • Death certificate of the insured employee
  • If there is no registered nominee and the legal heirs are making a claim, a succession certificate would be needed to establish the identity of the legal heirs.
  • The natural guardian can file a claim if the claimant is a minor. If there is no natural guardian, a Guardianship Certificate would be needed to establish the guardian’s identity and file the claim on behalf of the nominated minor.
  • A copy of the cancelled cheque of the bank account in which the claim is to be credited

The claim form and the aforementioned documents should be submitted to the regional EPF Commissioner’s Office. The claimant would also have to fill and submit Form 20 for EPF withdrawal and Form 10C/10D for claiming the benefits of EPF, EPS and EDLI schemes. After submitting the claim form and the relevant documents, the EPF Commissioner would assess the claim and verify it. 

After successful verification, the claim would be settled, and the amount would be credited to the specified bank account of the claimant. The EPF Commissioner is required to settle the claim within 30 days of receiving all the documents. If the claim payment is delayed, interest would be payable by the EPFO at 12% per annum on the outstanding claim amount till the date the claim is settled. 

Things to know about the EDLI scheme

Here are some crucial aspects of the EDLI scheme that you should know:

  • The death benefit received would be completely tax-free in the claimant’s hands.
  • You should be an EPF member as of the date of death to avail the EDLI benefit. If you have retired from service, you cease to be a member of the EPF scheme. In such cases, the EDLI benefit is not paid on death.
  • Even if you change your job, the EDLI scheme will continue to provide you with cover. It would simply shift from one employer to another, just like your EPF account. The new employer would, then, contribute to the scheme.
  • You would enjoy the benefit of the scheme even if you opt for an independent life insurance policy on your life.

So, understand what the EDLI scheme is all about and how it provides financial security to your family in the case of untimely demise. The coverage is free so that you can enjoy insurance protection without hurting your pockets. 

Ayushi Mishra
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