EPF doesn't just build your retirement fund -- it also provides free life insurance up to Rs 7 lakh under the EDLI scheme.
Kindly note that this illustration generated using Microsoft Copilot has only been posted for representational purposes.
In the previous part of this EPF Explainer series, we discussed nominations and inheritance rules, showing how EPF balances are passed to nominees. But what happens if a member passes away unexpectedly during service? That's where the Employees' Deposit Linked Insurance (EDLI) scheme comes into play.
EDLI is a life-insurance benefit linked to your EPF account, providing families with a lump-sum payout in the event of the untimely demise of an active employee. It underlines that EPF isn't just a retirement corpus -- it also serves as a safety net via EDLI.
What is EDLI?
- EDLI stands for Employees' Deposit Linked Insurance Scheme.
- It is administered by EPFO under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952.
- All eligible employees working in establishments covered under EPF/EPFO are automatically covered -- no separate enrollment or premium payment is required from the employee. The employer alone contributes for EDLI.
- Thus, being an EPF member (i.e. working in an EPF-covered establishment) automatically gives you EDLI coverage for life-insurance benefits.
Key Features and Payout Ceiling
- The EDLI benefit is computed based on the 'applicable monthly wage' (basic + DA), but this is capped at Rs 15,000/month for the purpose of calculating the insurance cover -- even if actual salary is higher.
- Employer's contribution to EDLI is 0.5% of basic + DA, subject to the Rs 15,000 ceiling.
- The maximum death-benefit payable under EDLI for a covered member is Rs 7 lakh (lump sum to nominee or legal heir) in the event of death during service.
- The scheme also guarantees a minimum benefit, ensuring that even for low balances or short service, a baseline amount is available.
How the EDLI Benefit Is Calculated (external link)
The commonly used formula:
- Benefit = (Average monthly salary for last 12 months, capped at Rs 15,000) × 30 + bonus
- The 'assurance benefit' (or additional fixed amount) is currently Rs 2.5 lakh
- Example: If an employee's average salary in the last 12 months is Rs 15,000, the benefit works out as (15,000 × 30) + 250,000 = Rs 700,000 (subject to overall cap)
- If the average salary is Rs 12,000, the benefit will be (12,000 × 30) + 250,000 = Rs 610,000
- The scheme also allows for an alternate calculation based on the average progressive PF balance during the preceding 12 months, and the higher of the two (salary-based or PF-balance-based) may apply.
Who Is Covered
- EDLI applies to active employees who are members of EPFO under a covered establishment.
- Employees do not pay anything toward this insurance -- the employer funds it fully.
- On the death of a covered employee during service, the insurance payout goes to the registered nominee (as per EPF nomination records) or, if no nomination exists, to legal heirs.
How to Claim EDLI
- In the event of death, the nominee or legal heir can file a claim through the employer or directly via EPFO's online systems.
- Required documents generally include the death certificate, nominee's ID proof, bank details, and EPF account information.
- Payout is a lump sum meant to provide immediate financial support for the family.
- EPFO aims to settle EDLI claims within 20-30 days, though this can vary depending on verification or KYC issues.
Why EDLI Matters
- It ensures EPF membership provides more than just retirement savings -- it also offers life-insurance protection.
- Since it is employer-funded and automatic, employees receive cover without any premium payment.
- The capped but meaningful payout of up to Rs 7 lakh gives crucial support to families of workers, particularly in low- and middle-income segments.
- EDLI complements other EPFO benefits: EPF for retirement savings and EPS for pension income, creating a broad social-security safety net for India's workforce.
Part 1: Payslip To Pension To Long-Term Wealth: How EPF Works
Part 2: EPF Secrets Revealed: Where Your 12% Goes
Part 3: EPF@8.25%: Is It Really Worth It?
Part 4: How EPS Turns Part Of Your PF Into Lifelong Income
Part 5: EPF: How To Withdraw Smart, Protect Your Corpus
Part 6: Your EPF Can Fund Housing, Surgery, Education...
Part 7: Who Gets Your PF Money After You...
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