Understanding EDLI: A Safety Net for Private Sector Employees in India
Understanding EDLI: A Safety Net for Private Sector Employees in India
The Employees' Deposit Linked Insurance (EDLI) scheme is a social security program introduced by the Indian government in 1976. It safeguards the families of private-sector employees in the unfortunate event of their demise while in service. Managed by the Employees' Provident Fund Organisation (EPFO), EDLI offers life insurance coverage to members of the EPF scheme.
Enrolment and Contributions
Organizations registered under the Employees' Provident Fund and Miscellaneous Provisions Act, 1952, are automatically enrolled in the EDLI scheme. This extends coverage to all their employees. The employer shoulders the responsibility of contributing towards the EDLI scheme while making monthly EPF contributions. Here's a breakdown of these contributions:
- Employee's Contribution: 12% of the basic salary and dearness allowance goes towards the EPF account.
- Employer's Contribution: The employer contributes 12% of the employee's basic salary and dearness allowance, divided as follows:
- 3.67% to the EPF account
- 8.33%, capped at Rs. 1250, to the Employees' Pension Scheme (EPS)
- 0.50%, capped at Rs. 75, to the EDLI account
Employer Options and Coverage Limits
Employers have some flexibility regarding EDLI coverage. They can opt for a group life insurance plan that offers benefits equal to or exceeding those provided by EDLI. In such cases, the EDLI contribution becomes optional.
Alternatively, if the employer chooses not to provide group life insurance, they can increase the EDLI contribution limit. In the absence of group life insurance, employers can contribute up to Rs. 15,000 per month towards the EDLI scheme for each employee.
EDLI primarily functions as a safety net in case of an employee's premature death. The family receives a lump sum payment to help manage the financial hardship caused by the loss.
Benefits of EDLI Scheme
- Free Insurance Coverage: A significant benefit of EDLI is that the insurance coverage comes at no cost to the employee. The employer handles the entire contribution.
- Automatic and Universal Coverage: Being linked to the EPF scheme, EDLI automatically covers all EPF account holders, ensuring uniformity and eliminating the risk of exclusion.
- Worldwide Coverage: The geographical location of the employee's death is irrelevant. As long as they are an active EDLI member, their family will receive the death benefit anywhere in the world.
- Decent Financial Support: The EDLI benefit amount provides substantial financial aid to the bereaved family, helping them navigate the loss.
Claim Process
- Claim Form: The claimant needs to complete and submit Form 5 IF.
- Employer Verification: The form requires the employer's signature and verification of the employee's active EDLI membership. If the employer is unavailable, authorized individuals like local legislators, bank managers, or government officials can attest to the form.
- Document Submission: Additional documents like Form 20 (EPF withdrawal), Form 10C/D (claiming other employee benefits), and death certificate need to be submitted to the regional EPF Commissioner's office.
- Verification and Payment: The EPF office verifies the claim and aims to disburse the benefit within 30 days. If there's a delay, interest is payable on the outstanding amount.
Eligibility for EDLI Coverage
EDLI coverage is generally applicable to employees whose monthly basic salary falls under Rs. 15,000. For those earning more, the maximum benefit is capped at Rs. 7 lakh. However, organizations with over 20 employees must participate in the EDLI scheme.
Documents Required for Claim
- Death Certificate of the deceased employee
- Succession Certificate (if the claim is filed by a legal heir)
- Guardianship Certificate (if a minor's claim is being filed by someone other than their natural guardian)
- Cancelled Cheque from the bank account where the claim amount should be credited