North India Statesman
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For millions of employed people, Employee Provident Fund (EPF) account simply means a lump sum or pension after retirement. But this mandatory savings account comes with a benefit that most employees are unaware of: free life insurance up to Rs 7 lakh.
If you are an EPF member, you are covered under a special scheme of the Employees’ Provident Fund Organization (EPFO) that provides financial security to your family. This benefit is called the Employees Deposit Linked Insurance (EDLI) scheme. The most special thing about this scheme is that not a single penny is deducted from the employee’s salary. The company bears the entire cost of this insurance.
EDLI, or “Employee Deposit Linked Insurance”, is a life insurance policy provided by EPFO to all its members. This is the third major benefit available with EPF and EPS (Employee Pension Scheme). As the name suggests, it is linked to your PF account. As long as you are an active EPF member, you are covered under this insurance.
People often think that if there is insurance then premium will also have to be paid. but it’s not like that. The entire premium of this plan is paid by your company, i.e. your employer. As per the rules, the employer deposits 0.5% of your salary (Basic+DA) into the EDLI scheme every month. There are no deductions from the employee’s salary, so it’s completely free for you. This scheme was launched with the aim of providing basic social security cover to millions of employees working in the organized sector.
This insurance cover becomes active in case of death of the employee during his service period. That is, if unfortunately an employee dies while on the job (be it in office, at home or on leave), the sum assured is distributed to his family or nominee. This scheme is important because it provides immediate relief to the family in case of sudden financial crisis.
A minimum amount of Rs 2.5 lakh and maximum Rs 7 lakh is available under this scheme. This amount is decided on the basis of the employee’s salary for the last 12 months and the balance in his PF account. The benefit of this scheme is available to every employee whose PF is deducted, whether they are permanent employees or working on contract. If you have a PF account, you are a member of EDLI. However, the scheme is not applicable to tea garden workers of Assam; There are separate provisions for them.
To protect the interests of employees, EPFO has made strict rules regarding this scheme. The sole responsibility of the employer is to timely deposit 0.5% of EDLI contribution for each employee. If an employer fails to do so or is negligent, a 1% monthly penalty is imposed. The employer has to pay this fine from his own pocket, which he cannot recover from the employee.
However, in certain situations, such as a company facing serious financial distress or major management problems, the board may reduce or waive this penalty, but this is an exception. The main objective of this scheme is to ensure that the employee’s family does not face any hindrance in getting financial assistance in times of need. The claim process is also quite simple. There is a provision to pay the sum assured within 20 days of the claim by the nominee or legal heir.
Now the most important question is how this maximum amount of Rs 7 lakh is decided? The sum assured is calculated in two parts. The first part is based on the average monthly salary of the employee for the last 12 months, and the second part is based on the amount deposited in his PF account.
The formula for calculation is as follows: (Average monthly salary of last 12 months x 35) + (50% of balance in PF account). Note that the maximum limit for calculating the average monthly salary is Rs 15,000. Similarly, the maximum limit for the PF balance portion is Rs 1.75 lakh. Thus, (15,000 x 35) = Rs 5,25,000 + Rs 1,75,000 = Rs 7,00,000.
