Employee Deposit Linked Insurance: All you need to know

• Follow

Employee Deposit Linked Insurance (EDLI) is a mandatory insurance scheme for private sector employees who are enrolled into EPF. The quantum of insurance provided depends upon the salary (Basic and DA) drawn in the last 12 months before death.

Who pays the insurance premium?

As you are aware, both the employee as well as the employer contribute 12% of salary towards EPF. EPF has three parts to it, apart from provident fund, part of employer’s contributions go towards Employee Pension Scheme (EPS) and part of it towards EDLI.

Every month, 0.5% of salary is contributed towards EDLI by the employers and by the government. This provides insurance to the employee if he dies during active service. The insurance is payable in case of natural death, illness or accident.

What is the quantum of insurance provided?

The amount of insurance is equal to thirty times the average salary drawn in the past twelve months. However, maximum salary is capped at Rs 15,000. Apart from this, a bonus of Rs 2.5 lakh (increased from Rs 1.5 lakh) is payable. The maximum insurance cover is Rs 7 lakh. The minimum insurance payable under this scheme is rs 2.5 lakh, increased from Rs 2 lakh in February last year

How does one claim the insurance amount?

The process to claim this is fairly simple. The insurance benefits can be availed by the family members, legal heir or nominees. In case of death during active service, the family or nominee needs to fill form 5IF and submit it along with death certificate and few other documents. The employer will need to sign and certify the form, if this is not possible it can be attested by a gazetted officer/magistrate/local MLA.

While form can be downloaded on the EPF website, it needs to be filled offline and submitted to EPF Commissioner’s office to process the claim.

How long does it take for the insurance amount to be disbursed?

On receipt of the complete documents, the EPF Commissioner is required to settle the claim within 30 days of the receipt of all documents along with the claim form. In case of delay, the beneficiary will get interest at the rate of 12% till the date of disbursement.

One important thing to keep in mind is this insurance in only available to a person in active service, which means he was employed with the company at the time of death.

(The writer is a Certified Financial Planner and founder, Finwise Personal Finance Solutions)