What Is EDLI? Employee Deposit Linked Insurance Scheme

Did you know your EPF account doesn’t just help you save for retirement, but also includes a free life insurance cover of up to Rs 7 lakh? It’s called EDLI, and most employees don’t even realise they have it.

But how does it actually work? Who qualifies? And how much can your family receive? Let’s break it down for you. 

Key Highlights

• Free life cover up to Rs 7 Lakh for all EPF-enrolled private sector employees
• Automatic Coverage under EPF, no separate registration or medical checks required.
• Simple claim process with just Form 5-IF, death certificate, nominee proof, and bank details.
• Employer-funded scheme, contribution of just 0.5% of basic salary (max Rs 75/month).
• Claim = 35× Last Drawn Salary + Rs 2 Lakh Bonus, capped at Rs 7 lakh.

What is EDLI?

Employees' Deposit Linked Insurance (EDLI) Scheme is a life insurance benefit for employees covered under the EPF. 

It's a life cover provided by the Employees' Provident Fund Organisation (EPFO), which ensures that in case of death of an employee while in service, his/her family members get financial support. There’s no extra premium to be paid for this life insurance. Employees get enrolled automatically when they become members of EPF. 

History and Evolution of EDLI

The Employees’ Deposit Linked Insurance (EDLI) Scheme was introduced in 1976 by the Indian Government as a social security measure for employees working in the private sector. 

In those days, most employees of private companies had no life insurance coverage to protect their families from financial difficulties if anything happened to them. 

To prevent such a situation, the Government introduced the scheme under the Employees’ Provident Fund and Miscellaneous Provisions, 1952, whereby an employee registered under EPF would automatically receive life insurance cover without having a separate policy.

Major Reforms Over the Years

EDLI has gone through progressive changes to ensure better financial protection:

• 2018: The minimum benefit was fixed at Rs 2.5 lakh so that even employees with marginal PF contributions got proportionate support.
• 2021: The maximum coverage increased to Rs 7 lakh.
• 2021 Update: Employees who changed jobs within 12 months before their death can also access the EDLI, which helps more and more private-sector workers and their families get significant financial help when times are tough.

Coverage and Benefits Under EDLI

Employees' Deposit Linked Insurance (EDLI) Scheme provides financial security to the family of an employee in case of his/her unfortunate death. Take a look at what makes it beneficial:

• Uniform Premium for All – The premium is a uniform 0.50% salary for all employees irrespective of age, health, and job hazards. Employers bear this cost, thus ensuring equal insurance protection for all employees.
• Support for Families – A lump-sum financial payment is made by the employer’s insurance arm to help the family in case the employee dies while in service.
• No Exclusions – Unlike most private insurance plans, there are no restrictions based on type of job, salary or medical conditions. Every employee under EPF is covered. 
• Coverage Beyond Borders – Death cover remains applicable if death occurs in any part of the world, subject to certain conditions (as per rules).
• Minimal Employer Contribution, Maximum Benefit – Employers contribute a nominal premium; however, the benefit can be up to Rs 7 lakh, which is significant financial support.
• Morale Boost for Employees – When employees know their family is financially secure, they are more confident and trusting towards the organisation.

Eligibility Criteria

Not all employees are eligible for EDLI (Employees' Deposit Linked Insurance) automatically. An employee should satisfy the conditions mentioned below to get covered under the scheme:

• Their basic salary should be up to Rs 15,000 to get full coverage. If exceeding Rs 15,000, the maximum payout will be capped at Rs 7 lakh.
• The employee should be working for a company that has more than 20 employees and is registered under the Employees’ Provident Fund (EPF) Act.

Required Documents:

To process a claim under the Employees Deposit Linked Insurance Scheme, you need to submit the following:

• Form 5 IF – Duly filled and signed.
• Death Certificate – If the employee is deceased.
• Succession Certificate – If the benefit is claimed by a legal heir.
• Guardianship Certificate’ – If the Claimant is the guardian of a minor, other than the natural guardian.
• ‘Cancelled Cheque’ – (To check the bank account number) to release the payment.

Contribution Details and Employer’s Role

The Employees' Deposit Linked Insurance (EDLI) Scheme is an employer-funded scheme. This means employees are not required to contribute anything. The employee contribution for EPF is deducted by the employer from the salary before being credited. Similarly, the EPS and EDLI contributions come from the employer.

EPFO Contribution Breakdown

Claim Calculation

Insurance payout = 35 × average monthly salary (basic + DA, max Rs 15,000) + Bonus amount (max Rs 1.75 lakh–2 lakh depending on EPFO rules)

Maximum total payout = Rs 7 lakh

In the event of the death of an employee, the nominee or legal heir shall receive the insurance money calculated as 35 times the average of the monthly salary drawn during the last 12 months of employment. 

Let’s under this with an example: 

Let’s say an employee had an average monthly salary (basic + DA) of Rs 6,000 over the last 12 months before their unfortunate demise.

Here’s how the insurance amount is calculated under the EDLI scheme:

Insurance Component: Rs 6,000 × 35 = Rs 2,10,000

Bonus (Additional Assurance Benefit): Rs 2,00,000

Total payout to the nominee = Rs 2,10,000 + Rs 2,00,000 = Rs 4,10,000

So, in this case, the employee's family would receive Rs 4.1 lakh as a one-time life insurance benefit—without paying any premium.

Let’s Understand Claims Process for EDLI

Losing someone you love could be challenging, and all the formalities can make it difficult to process. Here is a simple, step-by-step process for claiming EDLI benefits without hassle.

Step 1: Notify Employer

Inform the employer or the establishment of the demise of the employee. They will direct you on what to do and provide the relevant forms.

Step 2: Fill the Claim Form

Fill out Form 5-(IF), giving details such as the deceased's PF account number, nominee details, and bank details (attach cancelled cheque).

Step 3: Attach Supporting Documents

• Death certificate of the employee
• Nominee’s ID proof (Aadhar, PAN, etc.)
• Proof of relation, if applicable
• Bank details for fund transfer

Step 4: Submit and Verify 

Submit the form and documents to the employer/ EPF office for verification. The EPF office will process and approve the claim.

Step 5: Benefit Receipt

The nominee's account will then receive the insurance amount and the provident fund balance through EFT once the nominal amount is approved.

The EDLI scheme is a silent guardian, securing the financial well-being of employees' families without requiring the latter to spend even a single penny. It is truly reassuring to know that, right from the beginning of building a career up to the time of retirement, one’s family will be financially secure regardless of the presence of the insured.

In the case of those who are covered under EPF, their EDLI insurance is automatic; no extra paperwork and no extra contributions. All that one has to ensure is that the nominee details are updated to prevent obstructions in claims. A little knowledge today saves a lot of trouble tomorrow.