Employees Deposit Linked Insurance Scheme (EDLI)
Life is unpredictable, and it’s essential to be prepared for any eventuality. This is where life insurance plans come into play. They provide financial protection to your loved ones in case of your untimely demise. However, navigating the world of insurance can be overwhelming, especially for employees in the private sector who might not have access to such benefits from their employers. That’s where the Employees Deposit Linked Insurance Scheme (EDLI) comes in.
What is the Employees Deposit Linked Insurance Scheme (EDLI)?
The EDLI scheme, launched by the Government in 1976, aims to provide social security benefits to employees in the private sector. Managed and administered by the Employees Provident Fund Organization (EPFO), it offers term life insurance cover on the life of the member employee.
Under this scheme, organizations eligible for EPF also become eligible for EDLI. The employer contributes a portion of the employee’s basic salary towards EPF, which includes a nominal amount towards EDLI as well.
How Does EDLI Work?
The contributions made by employers towards EDLI are calculated based on a percentage of the employee’s basic salary and dearness allowance. While 12% goes towards EPF and 8.33% towards EPS (Employees’ Pension Scheme), 0.50% is allocated to the EDLI account.
Employers also have the option to opt for group term life insurance that provide coverage equal to or more than that provided by the EDLI scheme. If this option is not chosen, employers can contribute up to Rs.15,000 per month towards the EDLI scheme.
In case of an employee’s untimely demise, while being a member of the EDLI scheme, a lump sum benefit is paid to the employee’s family to compensate for the financial loss suffered.
Key Features of the Employees Deposit Linked Insurance Scheme
Understanding the key features of the EDLI scheme can help you make informed decisions about your financial security. Here are some important features to know:
1. Employer Contribution: The contribution towards EDLI is made solely by the employer, making it free for all employees.
2. Coverage: The scheme covers the risk of premature death and provides financial assistance to the employee’s family in such unfortunate situations.
3. Part of EPF: As part of the Employees Provident Fund, the EDLI scheme covers all employees who have an EPF account.
4. Uniform Coverage: The scheme covers death anytime and anywhere, ensuring uniform coverage for all employees.
Understanding EDLI Benefits
It’s crucial to understand how EDLI benefits are calculated and paid out in order to make use of this scheme effectively.
Benefit Calculation
The coverage under the EDLI scheme is calculated based on a formula that considers the average monthly salary drawn by the employee over the last 12 months preceding their date of death. The benefit amount is subject to a maximum of Rs.15,000 per month.
Additionally, a bonus amount of Rs.2.5 lakhs (increased from Rs.1.5 lakhs as of September 2020) is also paid along with the coverage.
Making a Claim
To claim the benefit under the EDLI scheme, the nominee or legal heir of the deceased employee needs to follow these steps:
1. Fill and submit Form 5 IF, which should be signed and certified by the employer or an authorized individual.
2. Submit Form 20 for EPF withdrawal, along with Form 10C/D for claiming benefits from other employee benefit schemes.
3. Submit all required documents, including the death certificate of the employee and any necessary succession or guardianship certificates, to the regional EPF Commissioner’s office.
The EPF commissioner will verify the submitted documents and process the claim within 30 days. In case of any delay, interest at a rate of 12% per annum will be payable on the claim amount.
Eligibility and Documents Required
For employees to avail of coverage under EDLI, they need to fulfil certain eligibility criteria:
Employees with a basic salary of up to Rs.15,000 can subscribe to this scheme.
Organisations with more than 20 employees should opt for the EDLI scheme.
To make a claim under EDLI, the following documents are required:
- Death certificate of the employee
- Succession certificate (if applicable)
- Guardianship certificate (if applicable)
- Copy of cancelled cheque for bank account details
Benefits of EDLI Insurance
The EDLI scheme offers several benefits to employees:
1. Free Coverage:The scheme provides free insurance coverage to all employees during their active service.
2. Minimal Employer Contribution: The employer’s contribution towards EDLI is minimal, yet it provides significant financial assistance to an employee’s family in case of their demise.
3. Uniform Coverage: There are no exclusions under this scheme, ensuring that every employee is covered uniformly.
4. International Coverage: Even if an employee dies internationally, the scheme provides death benefits to their family.
Conclusion
In conclusion, the Employees Deposit Linked Insurance Scheme (EDLI) offers valuable life insurance coverage to employees in the private sector. With its free coverage and minimal employer contribution, it provides financial security to employees and their families. By understanding the benefits and eligibility criteria of EDLI, you can make informed decisions about your financial well-being. To explore more life insurance plans and calculate your coverage needs, visit Bajaj Allianz Life Insurance’s website and use their life insurance calculator.
