Understanding all about Employees’ Deposit Linked Insurance scheme

All employees subscribed under the Employees’ Provident Fund (EPF) scheme are automatically covered under the Employees’ Deposit Linked Insurance (EDLI). It is a mandatory insurance cover offered to all EPF subscribers for which the employers make contributions. This insurance cover has no relation with the group insurance cover that an employer may offer to their employees.

The ongoing health crisis induced by the Covid-19 pandemic has already taken many lives, and their survivors may be financially dependent on them. Anybody who has lost a member in their family can claim the assurance benefit of up to Rs 7 lakh offered by the Employees’ Deposit Linked Insurance (EDLI).

What is the EDLI cover about?

In a world is full of uncertainties, getting assurance cover has become imperative for all individuals, more so for the breadwinners in every family. Individuals employed in the private sector may not get social security benefits that public sector and government employees enjoy.

Employees Deposit Linked Insurance Scheme (EDLI) was introduced in 1976 to ensure that the families of private-sector employees are not financially set back on the employee’s demise during their service.

As per the EDLI scheme, if an employee passes away during service and was in continuous employment for at least the preceding 12 months from his or her death, the nominee would receive assurance benefit paid out as a one-time payment.

Change of establishments is allowed in the duration of employment. The assurance benefit depends on the salary drawn by the employee and is between Rs 2.5 lakh (minimum) and Rs 7 lakh (maximum).

Until recently, the maximum assurance benefit under the EDLI scheme was capped at Rs 6 lakh. It was increased to Rs 7 lakh through a gazette notification dated 28 April 2021 by the Employees’ Provident Fund Organisation (EPFO) and the Ministry of Labour on the back of the Covid-19 pandemic.

Features of the EDLI scheme

All EPF subscribers are automatically covered under the EDLI scheme. An EPF subscriber becomes eligible for the EDLI scheme if he is in continuous employment for at least 12 months preceding death, and a change of organisations is allowed in this timeframe. The nominee will receive a sum between Rs 2.5 lakh and Rs 7 lakh if the subscriber dies during their service.

The assurance benefit payable depends on the salary of the subscriber. It is up to 30 times the average monthly salary drawn by the deceased employee in the last 12 months (capped at a maximum of Rs 7 lakh).

Employees don’t make any contribution to the EDLI scheme. Employers contribute 0.5% of the basic salary plus dearness allowance or a maximum of Rs 75 per month per employee.

Who can claim assurance benefit?

The nominee is entitled to claim the assurance benefit. If the nominee is not alive, the legal heir can submit a claim by providing necessary documents to prove the relationship with the nominee or the employee. The nominee registered at the time of opening the EPF account will stand as the nominee for the EPS and EDLI schemes as well.

Initiating claim

The nominee can lodge the EDLI insurance benefit claim by submitting the EDLI Form 5 IF to the regional EPF commissioner’s office. It is also recommended that the nominee submits Form 20 and Form 10 C/D to claim all benefits available under EPF and EPS schemes. The forms must be submitted along with other necessary documents.

To initiate the claim under the provisions of the EDLI scheme, the nominee must submit the Death certificate of the employee, succession certificate if the claimant is a person who is not the original nominee, guardianship certificate must be furnished if the claim is being made on behalf of a minor, bank details of the account to which the assurance benefit is to be transferred along with the filled Form 5 IF attested by bank manager, magistrate, MLA, MP, postmaster, sub-postmaster or a gazetted officer.

After submitting all the required documents, the claim should be processed within a period of thirty days. If there is a delay, the claimant shall receive interest at the rate of 12% per annum until the assurance benefit is received.

(The writer is Founder and CEO - Cleartax)