Employee Deposit Linked Insurance
Employee Deposit Linked Insurance (EDLI) provides life insurance cover to private-sector employees, offering a lump sum to beneficiaries upon the employee’s death.
- Lesser Premium Payable
- Quicker Claim Settlements
- Income Tax Benefits
What is Employee Deposit Linked Insurance?
Employee Deposit Linked Insurance (EDLI) is an insurance cover provided by the Employees’ Provident Fund Organization (EPFO) for private sector salaried employees. It offers a lump sum payment to the beneficiaries of an insured employee in the event of the employee’s death during the period of the service. EDLI applies to all organizations registered under the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952. All such organizations must subscribe to this scheme and offer life insurance benefits to their employees. The benefit amount is based on the last drawn salary of the employee.
Why should a Corporate take EDLI insurance from a life insurance company if it is already provided by EPFO?
Under Sec.17(2A) of the Act, employers may be exempted from contributing to the EPFO scheme if they provide better insurance benefits through an alternative scheme. EDLI insurance provided by life insurance companies is considered a better alternative because of:
- Lesser Premium Payable: Generally lower premiums compared to the EPFO scheme.
- Quicker Claim Settlements: Faster processing and disbursement of claims.
- Income Tax Benefits: Additional tax advantages for the employer.
- Higher Sum Assured: Possibility of obtaining a higher sum assured compared to the EPFO scheme.
What is covered under Employee Deposit Linked Insurance?
EDLI covers:
- Death Benefit: A lump sum amount paid to the beneficiaries in the event of the death of the employee while in service.
- Coverage Amount: The sum assured under EDLI is 30 times the average monthly salary (basic + DA) of the preceding 12 months, subject to a maximum limit of INR 7 lakh.
What are exclusions under Employee Deposit Linked Insurance?
There are no specific exclusions under the EDLI scheme. It provides coverage for death due to any cause, be it natural, accidental, or illness. However, the scheme does not cover employees who are not part of the EPF.
Why companies should take Employee Deposit Linked Insurance for their employees?
Mandatory Compliance
It is a statutory requirement for all organizations covered under the EPF Act.
Financial Security
Provides financial assistance to the family of the deceased employee, ensuring their well-being.
Employer’s Responsibility
Demonstrates the employer's commitment to the welfare of their employees.
Employee Morale
Enhances employee morale and loyalty by providing security to their families.
Why companies should take Employee Deposit Linked Insurance for their employees?
Mandatory Compliance
It is a statutory requirement for all organizations covered under the EPF Act.
Financial Security
Provides financial assistance to the family of the deceased employee, ensuring their well-being.
Employer’s Responsibility
Demonstrates the employer's commitment to the welfare of their employees.
Employee Morale
Enhances employee morale and loyalty by providing security to their families.
Key suggestions to make the best Employee Deposit Linked Insurance plan
Ensure Compliance
Regularly update and maintain employee records to ensure all eligible employees are covered.
Combine with Other Benefits
Integrate EDLI with other employee benefits for comprehensive coverage.
Employee Awareness
Educate employees about the benefits of EDLI to ensure they are aware of the coverage.
Timely Claims Processing
Set up an efficient process for claims to ensure quick disbursement to beneficiaries.
FAQs over Employee Deposit Linked Insurance
What is the minimum employee count for taking Employee Deposit Linked Insurance?
The EDLI scheme under EPFO applies to corporates with a minimum count of 20 employees, thus at least 20 employees are required for an EDLI insurance policy from any life insurance company.
How is the EDLI benefit calculated?
The benefit is calculated as 30 times the average monthly salary (basic + DA) of the last 12 months, with an additional bonus, subject to a maximum of INR 7 lakh.
What is the maximum sum insured under Employee Deposit Linked Insurance?
The maximum amount under the EPFO scheme is INR 7 lakh. However, corporates may opt for a higher sum insured when taking an EDLI policy directly from life insurance companies.
Who is the claim beneficiary under this policy?
The employee’s legal heir is the beneficiary of the claim amount under this policy.
What are the tax benefits for employers?
The premium of a group term life insurance plan is treated as an expense deductible from the profit and loss of a company, allowing employers to claim tax deductions under Section 37. For employees, the claim amount paid under this scheme is exempt from income tax under Section 10(10D) of the Income Tax Act, 1962.
How to claim EDLI?
Beneficiaries need to submit Form 5 IF along with the death certificate, EPF account details, and other necessary documents to the EPFO through the employer.
Can an employer be exempted from contributing to the EPFO EDLI scheme?
Yes, if the employer provides a better insurance benefit through an alternative scheme approved under Sec.17(2A) of the EPF Act.
Is there a requirement for a minimum number of years of service for the EDLI benefit?
No, there is no minimum service period required for availing the EDLI benefit. The employee is covered from day one of joining the EPF.
Can EDLI be extended to contract workers?
Yes, as long as the contract workers are part of the EPF scheme, they are eligible for EDLI coverage.
How does the EDLI scheme interact with other benefits like EPF and EPS?
EDLI works in conjunction with the EPF (Employee Provident Fund) and EPS (Employee Pension Scheme) to provide comprehensive benefits including life insurance, pension, and provident fund.
What happens if an employer does not comply with EDLI regulations?
Noncompliance with EDLI regulations can result in legal penalties and fines for the employer.
Are there any additional benefits or riders available with EDLI policies from private insurers?
Yes, some private insurers offer additional riders such as accidental death and disability benefits, critical illness cover, and more.
What is the process for transferring EDLI benefits if an employee switches jobs?
If an employee switches jobs, the EDLI benefits are transferable provided the new employer is also subscribed to the EPF scheme. The employee’s EPF account, along with the EDLI coverage, will be transferred to the new employer.
Benefits under Employee Deposit Linked Insurance
For Employees
- Financial Protection: Ensures financial security for the employee’s family in case of untimely death.
- Peace of Mind: Employees have peace of mind knowing their families are protected.
For Employers
- Enhanced Benefits Package: Improves the overall benefits package offered to employees.
- Compliance: Helps the employer comply with statutory requirements.
- Employee Satisfaction: Contributes to higher employee satisfaction.
Financial Security for Your Employees' Families
Ensure peace of mind for your employees with Employee Deposit Linked Insurance (EDLI) from Go Insure India. This policy provides life insurance coverage to private-sector employees, offering a lump sum payout to beneficiaries in the event of the employee’s passing, securing their loved ones' future.