Employee Deposit Linked Insurance (EDLI )was introduced by the Government in the year 1976 for private-sector employees. However, it was intended to offer financial support to the employee and their family in the happening of an unforeseen event.
Under the Employee Deposit Linked Insurance, the insured employee will have life coverage. So, in the untimely death of the employee, the dependents of the deceased will receive the death benefit as financial support.
Understanding the nuances of Employee Deposit Linked Insurance
Under the scheme, the Employee Provident Fund Organisation (EPFO) offers life insurance coverage to private sector employees. Thus, all registered companies under the EPF and miscellaneous Act, 1952 are eligible to apply for Employee Deposit Linked Insurance; and have to apply for the same.
Correspondingly, all registered organizations need to subscribe to this scheme and provide life insurance coverage to their employees.
Calculating the eligibility
The last drawn salary of the employee will determine the quantum of life cover that the employee will be eligible for. In the event of the eventuality of the employee, the beneficiary received the benefit.
Thus, you can calculate the quantum of Employee Deposit Linked Insurance as below:
- (Employee’s average monthly salary over the past 12 months (capped at Rs. 15,000 per month) * 30) + Bonus Amount (capped at Rs. 2, 50,000).
There is an overall cap as a maximum benefit for an employee at Rs. 7 lakh.
Key features of Employee Deposit Linked Insurance
- The Claim amount should not exceed Rs. 7 Lakh.
- However, the quantum of insurance cover is 30 times the average monthly salary drawn over the past 12 months by the employee.
- There is a provision of Rs. 2.5 Lakh, this is the minimum quantum of coverage.
- Companies employing more than 20 individuals have to register for EPF accounts which will make them automatically eligible for the scheme.t
- There is no additional contribution towards the registration for the scheme is required by either the employer or employee.
- Employers can avail of a group insurance policy in addition to this scheme
- Employer’s contribution towards this scheme is at 0.5% of the salary (basic salary + dearness allowance) subject to a maximum of Rs. 75 per month per employee.
- The maximum contribution is Rs. 15,000 per month; provided there is no other group insurance policy that the company has availed of.
- The beneficiary would receive the credit directly into his bank account.
- Factors like age and medical fitness of the employee do not influence the eligibility like in the case of other insurance.
- However, there is an option for the employer to opt-out of the scheme, if they have a better insurance plan.
- So, the employee does not contribute to employee deposit linked insurance benefits.
Additional read: Features of Employee Deposit Linked Insurance scheme you did not know
Claims management under Employee Deposit Linked Scheme
In case of an eventuality, the nominee will have to submit these documents:
- Form 5 IF,
- Death certificate of the insured employee,
- Legal succession certificate,
- If the beneficiary is a minor, a guardianship certificate is mandatory if there is no natural guardian, and
- Canceled cheque of the account for the credit to happen.
The primary motive of this policy e is to offer financial security to the dependents of the employee. These schemes are transferable across multiple jobs. Thus, with just the account number, the new employer will continue to contribute to the same account.
About The Author
Shashank
MBA Finance
With seven years of dedicated experience in the insurance industry, Shashank has become a recognized expert in Employee Deposit Linked Insurance (EDLI). As a committed writer for SecureNow, he crafts insightful blogs and articles that demystify the complexities of EDLI, helping employers and employees understand the benefits and importance of this essential coverage. Throughout his career, Shashank has developed a deep understanding of the intricacies of EDLI, including policy details, regulatory requirements, and best practices for implementation. Their ability to translate complex insurance topics into clear, practical advice makes their content invaluable for those looking to protect their workforce with comprehensive insurance solutions.
