Guide to the Employees Deposit Linked Insurance Scheme

The pandemic has reiterated the necessity of insurance coverage for every individual. While public sector employees enjoy benefits like life insurance and medical coverage from the government, private sector employees largely have to rely on personal insurance coverage.

However, the Employees’ Deposit Linked Insurance Scheme (EDLI), launched in 1976 by the government, offers some respite. It is an insurance cover provided to private sector employees under the provisions of the Employees’ Provident Fund Organisation (EPFO). The Employee Provident Fund is a mandatory requirement for any organisation with more than 20 employees, as per the Employee Provident Fund Act, 1952.

Under the same umbrella, the EDLI scheme is a mandatory requirement that employers must fulfil in case there is no other group employee insurance cover. Here is a detailed overview of the EDLI scheme. 

What is EDLI Scheme?

The Employee Deposit Linked Insurance (EDLI) Scheme works in tandem with the Employee Provident Fund (EPF) and Employee Pension Scheme (EPS) schemes. All employees registered with the EPF scheme are automatically covered under the EDLI scheme.

EDLI is a basic insurance cover that every employee is entitled to so that their families get financial assistance in the event of the employee’s demise while being a member of the fund. 

Features of the EDLI Scheme

EDLI scheme offers the following features: 

• EDLI applies to all employees registered with the EPF scheme. For the calculation of EDLI benefits, basic monthly salary is capped at Rs. 15,000. 
• The minimum amount of benefit under EDLI scheme is Rs. 2.5 lakh and the maximum is Rs. 7 lakh.  
• The insurance benefit provided under EDLI is 30 times the average monthly salary in the past 12 months, subject to a maximum limit of Rs. 15,000. The average monthly salary is calculated as the basic salary + dearness allowance of the employee.
• Over and above this cover, a bonus cover of Rs. 2.5 lakh is also provided by the EPFO under EDLI scheme.
• As an employee, you need not enrol separately for the EDLI benefits. If you are enrolled with EPFO, the EDLI enrolment is effective.
• The insured employee does not have to make any payment towards the EDLI scheme.
• Every EPFO member is  eligible for the EDLI benefit right from day one.
• There are no exceptions to the life cover under the EDLI scheme. For example, there are no age limit conditions or medical tests required for enrolment into this scheme; it is a blanket cover provided to all employees under EPFO.
• EDLI scheme benefit is not applicable if an employer opts out of it. This is possible when the employer opts for a group insurance cover that is higher than the EDLI cover. In such cases, only the employer’s group insurance cover is applicable.
• In the event of an eventuality, the insurance benefit is paid directly to the family member, nominee, or legal heirs as per the enrolment and succession rules.

Contributions to the EDLI Scheme

The contributions towards the Employees Deposit Linked Insurance scheme are made by the employer on behalf of the employees. The employer deducts EPF from the employee’s salary, and no separate deductions are made for the EDLI benefit.

The distribution of the employee’s and the employer’s contribution towards EPF is as follows:

Employee’s contribution

• EPF: 12% of basic salary + DA 
• EPS: Nil 
• EDLI: Nil 

Employer’s contribution

• EPF: 3.67% of basic salary + DA 
• EPS: 8.33% of basic salary+DA 
• EDLI: 0.5% (subject to a maximum of Rs. 75)

Documents Required to Claim Under EDLI

The following documents are required to file a claim under the EDLI scheme: 

• Form 5 IF filled out by the nominee/legal heir to claim the death benefit amount after an employee’s demise. In the case of more than one person claiming the death benefit, each nominee/heir needs to fill out a separate form. The guardian needs to submit the form on behalf of a minor beneficiary. In case there is more than one minor and the guardian is the same, one form filled out by the guardian is sufficient.The claim form is required to be signed and certified by the employer.
• The death certificate copy of the insured employee.
• Legal heirs must submit a succession certificate as per the succession laws.
• In the case of minors claimants, a guardianship certificate is required if the guardian is not a natural guardian.
• A cancelled cheque for the account where the beneficiary wants to receive the claim amount.

Calculation of EDLI Cover 

Let us take different examples to understand the EDLI benefit calculation:

The formula used for calculating EDLI cover is:  

Average Monthly Salary of the Employee for the last 12 months (maximum of Rs 15,000 p.m.) x 30 + Bonus amount of Rs 2,50,000

Case 1: An employee earns Rs. 14,000 (salary+DA). 

The applicable cover is 14000*30 = 4,20,000 + bonus 2,50,000 = Rs. 6,70,000 

Case 2: An employee earns a salary of Rs. 18000 (salary+DA) 

The applicable cover is: 15000*30 = 4,50,000 + bonus of 2,50,000 = Rs. 7,00,000

 Case 3: An employee is a member of EPF and covered under LIC Group Life cover provided by the employer.

The applicable cover under EDLI: Nil, since the employee is covered by Group Life cover and the employer has opted out of EDLI in this case even though employees are enrolled in EPF.

Final Thoughts

The Employees Deposit Linked Insurance scheme effectively provides a financial safety net to private sector employees. The scheme guarantees life insurance to every salaried employee enrolled under the EPF scheme. The employer must provide group life insurance if they have opted out of EDLI. There is no premium to be paid by employees for EDLI cover. 

FAQs about Employees Deposit Linked Insurance Scheme