Most EPF members know about the retirement savings benefits of the scheme, but many are unaware that EPF membership also comes with an insurance benefit at no additional cost. Eligible members are automatically covered under a scheme that offers insurance protection of up to ₹7 lakh.
The benefit is available under the Employees’ Deposit Linked Insurance (EDLI) scheme and is fully funded by employers. Linked to the Employees’ Provident Fund scheme, it provides financial support to the nominee or eligible family member in the event of the employee’s death during service, without requiring any separate premium payment.
What is EDLI scheme?
The EDLI scheme is a statutory life insurance benefit for EPF members. In case of death of an EPF-covered employee during the period of employment, the nominee receives a minimum compensation of ₹2.5 lakh and up to ₹7 lakh, based on the employee’s salary and EPF balance, according to EPFO’s website.
However, if an employee dies before completing one year of continuous service, the minimum payout benefit available to the legal heir or nominee is ₹50,000, even though their PF account does not have sufficient balance.
Employers contribute 0.5% of the basic salary, with no deduction from employees. Claims are processed within 20 days, ensuring quick financial support to the family, the social security agency stated.
What is the eligibility criteria for EDLI scheme?
Any company or organisation that has more than 20 employees are required to register for EPF. Therefore, any employee who has an EPF account automatically becomes eligible for the EDLI scheme.
The claim amount under EDLI is 35 times the average monthly salary in the past 12 months, subject to a maximum amount of ₹7 lakh, according to Cleartax.
To ensure smooth disbursal of EPF and EDLI benefits, employees should submit a nomination through the EPFO member Portal and ensure that nominee details are updated. Any major life event, such as marriage, the addition of a family member, or changes in existing nominee details, should be reflected in the nomination records to avoid delays or disputes during claim settlement.
Benefits of EDLI scheme
There are multiple benefits of this lesser-known scheme:
- Assured insurance cover: It functions as a social security and employee welfare measure backed by the government, hence life insurance benefits are guaranteed.
- No employee contribution: The scheme offers significant financial assistance to beneficiaries despite a relatively small contribution, which is also coming from just the employer.
- Every EPF member is covered: The scheme covers all eligible employees irrespective of their designation or salary level. It also does not have exclusion clauses.
- No restrictions: Death benefits remain payable even if the employee passes away outside India.
Are EDLI proceeds taxed?
Any payout made to the legal heirs or nominees on demise of the EPF member is exempt from tax. Since EDLI contribution is a part of monthly EPF contribution, similar tax benefits apply.
How to file a claim for the insurance benefits?
EDLI benefits can be claimed by the nominee specified by the EPF member. In absence of a valid nomination, eligible family members or legal heirs can submit a claim to receive the proceeds.
To qualify for the benefit, the deceased employee must have been an active EPF member at the time of death. The claimant is required to fill and submit EDLI Form 5 IF, which must be signed certified by the employer.
The claimant must submit all the documents along with the completed form to the regional EPF Commissioner’s Office for processing. Once all the documents are provided and the claim is accepted, the EPF commissioner must settle the claim within 30 days from the receipt of the claim.
If the concerned authority fails to settle the amount, the claimant is entitled to interest at 12% per annum till the date of actual disbursal, Cleartax noted.
