The Employees' Provident Fund Organisation (EPFO), an integral support system for salaried individuals in India, offers multiple schemes. While most know about the EPF Scheme and the Pension Scheme (EPS), not too many salaried employees know about the Employees' Deposit-Linked Insurance (EDLI) scheme. A distinctive feature of the EDLI scheme is the provision of life insurance coverage up to Rs 7 lakh, with the employer bearing the cost of contributions.

Understanding the EDLI scheme

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Introduced in 1976, the EDLI scheme's purpose was to provide a financial safety net to families upon the untimely demise of EPFO members. This scheme is comprehensive with no exclusions, and the insurance cover depends on the salary drawn in the last 12 months before the member's death.

EPFO members are automatically enrolled for EDLI, with cover extended as long as they remain active EPF members. Interestingly, there is no minimum service period to avail of EDLI scheme benefits. Also, the employer must make the EDLI contribution, with no fees deducted from the employee’s salary.

The amount that can be claimed under ELDI is calculated as 35 times the average monthly salary earned in the past 12 months. There is a maximum limit of Rs 7 lakh for the claim amount. The average monthly salary is calculated as the basic + dearness allowance of the employee. Notably, a bonus of Rs. 1.75 lakh is also applicable under this scheme. The employer has the option to opt out of the scheme in case a higher-paying life insurance scheme for employees is offered under Section 17 (2A).

Calculating the EDLI insurance cover

The insurance cover provided by the EDLI scheme varies from Rs 2.5 lakh to Rs 7 lakh. The cap was raised to Rs 7 lakh from Rs 6 lakh as of April 28, 2021. The employer contributes a 0.50% premium on the monthly wages towards this scheme, with a limit of Rs 15,000.

When a member of an insurance policy passes away, their beneficiaries receive an amount that is calculated as 35 times the average monthly salary earned during the last 12 months of employment. The highest possible average monthly salary contribution for an employee is limited to Rs 15,000. Hence, 35 times the salary amounts to Rs 5,25,000. Additionally, a bonus amount of up to Rs 1,75,000 is paid to the claimant under this scheme. As such, the total amount payable to the beneficiary under this scheme is Rs 7,00,000.

Claiming EDLI benefits

Should an employee pass away during their service, the EDLI scheme provides a lump-sum payment to the registered nominees. The claim process is straightforward, with the need to furnish certain documents such as death and date of birth certificates, proof of bank account, Aadhaar number, and photographs of the claimant/s. The EPFO has also stated that claims will not be rejected due to Non-Contributory Period of Service (NCP) days, which are periods of leave without wages or absence.

To claim the insurance, the nominees, heirs, or family members of the deceased member have to fill EDLI Form 5 IF. This form, along with the required document proofs, needs to be submitted to the regional EPF Commissioner’s office. The claim is expected to be settled within 30 days, with the commissioner liable to pay an interest of 12% per annum from the deadline date to the date of actual disbursal, if the claim is not settled within this timeframe.

Who Can Claim EDLI benefits

The EDLI scheme benefits can be claimed by the nominee of the member. If no nominee is declared, the surviving family members, defined as the spouse, male children (up to 25 years), and unmarried daughters, are eligible for claiming the benefits. In the absence of surviving family members, the legal heir of the deceased member can claim the insurance benefits.

An e-nomination is advisable to ensure a smooth transition of benefits to the nominees. It is also essential to remember that all claims must be certified by the employer. If no employer is present, the form can be attested by an authorised official such as a gazetted officer, magistrate, MP, MLA, among others.