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New Delhi: For crores of salaried people, an Employees' Provident Fund (EPF) account means a lump sum amount received after retirement or old age pension. But there is a facility associated with this savings account, which most employees are not aware of. This facility is free life insurance of up to Rs 7 lakh. If you are a member of EPF, you get covered under a special scheme of the Employees' Provident Fund Organization (EPFO), which provides financial security to your family. The name of this facility is 'Employee Deposit Linked Insurance' i.e. EDLI Scheme. The biggest feature of this scheme is that not a single penny is deducted from the employee's salary for this purpose. This insurance is entirely provided by the company.
EDLI i.e. 'Employee Deposit Linked Insurance' scheme, is a life insurance policy offered by EPFO to all its members. This is the third major benefit available with EPF and EPS (Employees' Pension Scheme). As the name suggests, it is linked (linked) to your PF account. As long as you are an active member of the EPF, you are covered under this insurance cover.
Often people think that if there is insurance, then there will be premiums too. But that's not the case in this case. Your company i.e. your employer pays the entire premium for this scheme. According to the rule, the employer deposits 0.5% of your salary (Basic + DA) every month in the EDLI scheme. There is no deduction for this from the employee's salary, so it is completely free for you. This scheme was started with the aim of providing a basic social security shield to crores of employees working in the organized sector.This insurance cover is activated in case the employee dies during the service period. That is, if an employee passes away while in the job (whether in the office, at home, or on leave), then his family or nominee (nominee) is given this insurance amount. This scheme is important because it works to provide immediate relief to a family in case of a sudden financial crisis.
The minimum amount available under this scheme is Rs 2.5 lakh and the maximum amount is Rs 7 lakh. This amount is decided on the basis of the salary of the employee for the last 12 months and the balance deposited in his PF account. This scheme benefits every employee whose PF is deducted. It doesn't matter if you are a permanent (Permanent) employee or working on a contract. If you have a PF account, you are a member of EDLI. However, this scheme does not apply to the employees of tea gardens of Assam; there are separate provisions for them.
EPFO has made strict rules regarding this scheme, so that the interests of employees can be protected. It is solely the responsibility of the employer to collect 0.5% contribution of EDLI for each of its employees on time. If an employer fails to do so or is negligent, he is fined (Damages) at the rate of 1% per month. The employer has to pay this penalty from his own pocket, which he cannot recover from the employee.
However, in certain circumstances, such as the company going through a serious financial crisis or if there is a major management problem, the Board may reduce or waive these fines, but this is an exception. The main objective of the scheme is to ensure that the employee's family does not get any hindrance in getting financial assistance in times of need. The process of making a claim is also quite straightforward. There is a provision to pay the insurance amount within 20 days if the claim is made by the nominee person or legal heir.
Now the most important question is how is this maximum amount of Rs 7 lakh fixed? Actually, the insurance amount 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 on the amount deposited in his PF account.
The calculation formula is as follows: (Average monthly salary of last 12 months x 35) + (50% of balance deposited in PF account). The thing to note here is that the maximum limit for calculating the average monthly salary has been fixed at Rs 15,000. Similarly, the maximum limit for the PF balance portion is Rs 1.75 lakh. Thus, (Rs. 15,000 x 35)
