All You Need to Know about EDLI if You are an EPF Member

Do you know that the Employee Provident Fund Organization (EPFO) has increased the minimum assurance (life insurance) benefits under its Employee Deposit Linked Insurance (EDLI)? Now, the assurance benefits for the eligible employee will stand at a minimum of Rs. 2.5 lakhs and maximum of Rs. 7 lakhs. So this could be a good time to know what is EDLI and how one can avail EDLI benefits.

EDLI Scheme first enacted in 1976 by the Government of India, basically provides an insurance cover that is to be paid in case of death of the employee during his working life. However this insurance cover is withdrawn if the employee retires/quits/is terminated from work at an EPF registered firm. It is paid to the employee’s nominee by the employer. The objective of EDLI is to put in place a mechanism to provide with income security in form of a lump sum payment to the family of deceased.

One interesting thing about the EDLI scheme is that you need not to subscribe to the scheme separately as any employee having an EPF account under the EPF and MP Act, 1952, automatically becomes a beneficiary to EDLI scheme. There is no further exclusion under the scheme.

EDLI Contributions

In case, an organization is covered under the EPFO and does not have a separate group insurance for its employees, the employer needs to monthly contribute 0.5% of the employee’s basic salary + dearness allowance (capped at Rs 15000) to EDLI scheme as insurance premium. Hence if the basic salary + dearness allowance come to Rs 15,000 per month, the EDLI contribution would be Rs 75. There are no separate contributions made by the employee or the government.

How much insurance will you get under EDLI

The insurance cover is variable under the EDLI scheme as it is based on the subscriber’s average balance in his PF account in the last 12 months. Insurance cover calculation under EDLI is a two step process.

Step 1. The average monthly salary (Basic+DA) during the 12 preceding months subject to a maximum of Rs.15,000 is multiplied 35 times.

Step 2. In addition to above, 50 percent of the average balance in the account of the deceased in his provident fund during the last 12 month is taken.

It is to be noted that the sum total of above steps is subject to a minimum of 2.5 lakhs and maximum of 7 lakhs.

For example, if your monthly salary is Rs 20,000 and the balance in your EPF account is Rs 5 lakh, you will be eligible to get (Rs 15,000*35= Rs 525,000)+(50%*Rs 600,000). This comes to Rs 5.25 lakh + Rs 3 lakh. However, this figure of Rs 8.25 lakh exceeds the cap of Rs 7 lakh, laid down by the EPFO. Hence the payout to the nominee under EDLI is Rs 700,000 only.

Insurance Claim Procedure Under EDLI

The nominee need to first fill up Form 5 IF in order to claim the insurance amount under the EDLI scheme. In case there are multiple claimants then the form needs to be filled by them separately. If the claimant is a minor then a guardian need to fill the claim form on his behalf.

The form has to be filled offline and the employer needs to furnish a certificate mentioning the date of the death of the member. After filling up the form, the nominee needs to submit the form to the EPF Commissioner’s office along with other document proofs like death certificate, guardianship or succession certificate (as per applicability), and a copy of cancelled cheque. Once the claim is raised, the EDLI Act, 1976 mandates the claim to be settled within 30 days. If this is not done, the EPFO is liable to pay interest at the rate of 12% for the delay.