EDLI: Employee Deposit Linked Insurance Scheme

EDLI or Employee Deposit Linked Insurance is an added benefit available with the Provident Fund (PF) and Employee Provident Fund (EPF). EPF is a retirement savings scheme where you and your employer deposit a portion of your basic salary each month.

You contribute 12% of your basic salary to the PF account, whereas your employer contributes 3.67%. Your employer also contributes 8.33% to the Employees' Pension Scheme (EPS) to help you or your family receive a pension. Also, when you are enrolled for EPF and EPS, you are automatically covered under the Employees Deposit Linked Insurance Scheme (EDLI).

If you work in the private sector, the Employee Provident Fund Organisation offers the Employees' Deposits Linked Insurance Scheme (EDLI).. Your nominee is eligible to receive insurance benefits, provided you meet the following eligibility criteria:

• You and your employer should be contributing a minimum of 24% to EPF and EPS

• All contributions (including yours) should be made by your employer

• You work in the private sector

• Your basic salary is ₹ 15,000 or below

EDLI was launched in 1976 and covers employers who provide EPF provisions to their employees. EDLI offers life insurance coverage to employees.

• The claim amount under ELDI is limited to 35 times the average monthly salary and capped at ₹.6 lakhs. With effect from April 2021, the maximum benefit has been revised upward to₹.7lakhs.

• There is a provision for paying out a bonus of ₹ 1.5 lakhs to the claimant. This amount has also been subsequently revised to ₹ 2.5 lakhs.

EDLI Through EPF Contribution:

EDLI works with EPF, and the benefit under the scheme depends on your last drawn basic salary.

Your contribution:

• EPF - 12%

• EPS - 0

• EDLI - 0

Your employer’s contribution:

• EPF - 3.67%

• EPS - 8.33% or ₹ 1,250 whichever is lower

• EDLI - 0.50% or ₹ 75, whichever is lower

You may estimate the payout in EDLI using the following formula:

Your average monthly basic salary for the last 12 months (capped at ₹15,000 per month) * 30 + +₹ 2,50,000 (Bonus Amount).

Features of Employees' Deposit Linked Insurance

Insurance mitigates risk and offers financial support to the family. In 1976, the government introduced EDLI for private-sector employees. The primary objective of EDLI is to provide financial security to the account holder’s family. In case of untimely, unfortunate demise, the EDLI saving scheme offers financial support to the nominee. The following are the highlights of EDLI:

Key Highlights of Employees' Deposit-Linked Insurance:

• The claim amount offered is 30 times the basic salary.

• The maximum benefit is ₹7 lakhs

• The bonus offered is ₹2.5 lakhs

• If your employer has 20+ employees on the payroll, the organisation has to mandatorily register for EPF. This implies you are automatically eligible for EDLI.

• There are no exclusions in EDLI. Your coverage is comprehensive to the extent of the sum assured.

• EDLI considers basic + Dearness Allowance (DA) if your salary structure has a DA component.

• In the case of a claim, the sum assured is directly transferred to the nominee’s account.

• Age does not impact EDLI eligibility.

• As per Section 17(2A) of the Employees Provident Fund Act, your employer can opt out of the EDLI if the organisation has better life insurance coverage for its employees.

Benefits of the EDLI Scheme

The Employees’ Deposit Linked Insurance (EDLI) Scheme offers life insurance coverage to private sector employees enrolled in the Employees’ Provident Fund (EPF). Even though it comes at no cost to the employee, it offers critical protection to the employee’s family during critical times. Some of the key benefits are as follows: 

• Free Life Insurance Cover for Employees: The EDLI scheme provides free life insurance cover to employees. The employee is not required to pay any premium towards this coverage. The employer contributes 0.5 percent of the basic salary (up to a wage ceiling of ₹15,000) towards the EDLI fund. Despite this nominal contribution, the scheme ensures a life insurance benefit of up to ₹7 lakhs to the legal nominee or family members of the deceased employee.
• Coverage Without Any Exclusions: EDLI ensures that all employees registered under the EPF without any exclusions based on job role, salary level, or employment duration. This universal inclusion reinforces the spirit of social security and fairness across all levels of employment.
• Protection Even While Working Abroad: Due to an increase in the global workforce, many Indian employees take up assignments or projects overseas. The EDLI scheme does not restrict its coverage to employees working within India. If an employee dies while posted or working abroad under an Indian employer, the family or nominee is still eligible to receive the death benefit. This makes EDLI a borderless protection plan.
• Substantial Financial Relief to the Family: Though the employer’s contribution is minimal, the amount received by the nominee in case of the employee’s death can be substantial. The benefit is calculated as 35 times the last drawn basic salary plus dearness allowance, along with a bonus of ₹1.75 lakhs. The maximum payout can go up to ₹7 lakhs.
• Guaranteed Benefit with Government Backing: As a government-backed scheme, EDLI carries the assurance of reliability and timely disbursement. There is no dependency on market performance or investment returns. The funds are maintained and regulated by the EPFO, which ensures transparency and ease of claim settlement. The involvement of the government adds a layer of trust and credibility to the scheme.
• Boosts Employee Morale and Well-Being: ELDI assurance improves overall morale, loyalty, and confidence among the workforce. When employees feel protected, they are more likely to engage productively at work.  This eventually supports a healthier and more stable work environment.
• Automatic Coverage from Day One: Employees are covered under the EDLI scheme from the very first day of their job. There is no waiting period or requirement to apply separately for coverage. This eliminates paperwork and ensures immediate protection. It is easy for the workers who indulge in high-risk roles or industries.
• Easy Claim Process for Nominees: The EDLI scheme has an easy claim process. The nominee or legal heir needs to fill out Form 5IF and submit it along with the necessary documents to the EPFO office. With proper documentation and employer verification, claims are generally processed without any delays. It ensures families receive support during critical times.

How to Claim EDLI Benefits?

The process to receive the claim amount is listed below. The nominee should follow the same:

a) Fill Form 5IF
b) Get the claim form signed by the certified employer
c) Form 20 can also be submitted to withdraw money from the EPF account
d) Form 10C/10D can also be submitted to avail of a pension benefit or withdraw from the EPS account.

Documents Required To Claim EDLI

For processing the EDLI claim, the following documents are required:

• Form 5 IF
• Death certificate
• Succession Certificate
• A cancelled cheque of the account to which the claim amount should be transferred.

EDLI is a unique insurance scheme that provides risk cover for being a subscriber of EPF. 

There is no additional premium to be paid to avail of this cover. However, EDLI offers basic financial safety for your family. As your income grows, you should include a separate term insurance plan in your folio. The maximum claim permissible under this scheme is ₹7 lakhs. 

As a thumb rule, you should have life insurance cover at least 10 times your annual income. Thus, while EDLI benefits may be there, it does not offer adequate financial safety to your family in your absence.

If your basic salary is ₹ 15,000 and your gross salary is ~₹ 30,000, your life insurance cover should be approximately ₹ 40 lakhs. Also, while the EDLI benefit is capped at a salary of ₹ 15,000, your family’s lifestyle will be based on much more.

Term life cover of 10-15 times your annual income is sufficient to take care of your family’s financial needs in your absence.

Final  Thoughts 

The EDLI scheme is a valuable safety net, offering no-cost life cover to employees from day one of their EPF membership. It ensures that your loved ones receive timely financial support in case of an untimely loss, regardless of where you work, even abroad. However, its benefits are capped at ₹7 lakhs, which may not be enough to sustain your family’s lifestyle or long-term needs.

That’s why it’s wise to complement EDLI with a robust term insurance plan that matches your income, lifestyle, and future goals. 

So, what are you waiting for? Explore your options under Canara HSBC Life Insurance and give adequate long-term financial protection to your loved ones.