EDLI: Everything You Need to Know About Employee Deposit Linked Insurance

EDLI: Employee welfare is an essential aspect of any organization, and employers must go beyond just providing basic amenities to their employees. In this regard, Employee Deposit Linked Insurance. is one of the popular initiatives that can help employers ensure the financial well-being of their employees and their families. This scheme provides financial protection to employees’ families in the event of the employee’s death. In this article, we’ll examine the EDLI scheme, its benefits, and how it works.

What is the Employee Deposit Linked Insurance Scheme (EDLI)?

EDLI (Employee’s Deposit Linked Insurance) is a group insurance scheme provided by the Employees’ Provident Fund Organisation in India, while group health insurance is a type of insurance policy that covers a group of people, typical employees of a company, for medical expenses.

How does the EDLI Scheme work?

The EDLI Scheme is linked to the employee’s Provident Fund (PF) account. The employer is required to contribute 0.5% of the employee’s monthly PF wages towards the EDLI scheme, subject to a maximum of Rs. 75 lacs per month. In case of the employee’s death, the nominee or legal heir is entitled to a sum assured equal to 20 times the average monthly PF wage of the employee during the preceding 12 months, subject to a maximum of Rs. 7 lacs.

EDLI’s Prominent Aspects

EDLI or Employee Deposit Linked Insurance Scheme is a term life insurance policy that provides financial protection to the employees’ families in the unfortunate event of the employee’s death. Below are the noteworthy features of EDLI:

• The EDLI benefits can be claimed by the nominee, legal heir, or family member of the employee.
• Any member of the Employee Provident Fund Organization (EPFO) is automatically enrolled in the EDLI scheme, ensuring they have adequate coverage.
• The EDLI coverage is applicable only to active members of the EPF scheme. If an employee quits their EPF registered job, they cannot claim EDLI benefits.
• The employee does not need to have a minimum service period to avail of the EDLI scheme benefits.
• The employer must pay the EDLI contribution, and the employee’s salary cannot be deducted for this purpose.
• The average monthly salary calculation is based on the employee’s Basic and Dearness Allowance.
• A bonus of Rs. 1.75 lacs is also applicable under the EDLI scheme.
• The employer can opt out of the scheme if they have a higher-paying life insurance scheme for employees under Section 17(2A).
• One important aspect to consider when it comes to the Employee Deposit Linked Insurance Scheme (EDLI) is the tax implication, as the premium paid towards the EDLI scheme is eligible for tax deduction under Section 80C of the Income Tax Act.
  
  
  

Who is eligible for the EDLI Scheme?

All employees who are members of the EPF scheme are eligible for the EDLI scheme. The scheme covers both permanent and temporary employees, including those working on a contractual basis.

Benefits of the EDLI Scheme:

1. Provides Financial Security to the Employee’s Family: The primary benefit of the EDLI scheme is that it provides financial security to the employee’s family in case of the employee’s death. The sum assured is a substantial amount, which can help the family tide over financial difficulties during such a difficult time.
2. Cost-Effective: The EDLI scheme is cost-effective as the employer is required to contribute only 0.5% of the employee’s monthly PF wages towards the scheme, subject to a maximum of Rs. 75 per month. This is much lower than the cost of providing separate life insurance to employees.
3. Helps Attract and Retain Talented Employees: Providing additional benefits like the EDLI scheme helps employers attract and retain talented employees. It demonstrates the employer’s commitment to employee welfare, which can be a crucial factor in attracting and retaining the best talent.
4. Reduces Financial Burden on the Employer: As the EDLI scheme is a group term life insurance policy, it reduces the financial burden on the employer to provide separate life insurance to their employees.
5. Easy to Administer: The EDLI scheme is easy to administer, linked to the employee’s Provident Fund (PF) account. The employer is required to make the contribution towards the scheme while making the monthly PF contribution.
   
   
   
   

Conclusion

The Employee Deposit Linked Insurance Scheme is a beneficial scheme that provides financial protection to employees’ families in the event of the employee’s death. It is an affordable way for employers to provide life insurance benefits to their employees without incurring additional costs. With the increasing awareness of the importance of employee welfare, more and more employers are opting for the EDLI scheme. It is a win-win situation for both the employer and the employee. Employers can demonstrate their commitment to employee welfare, while employees can have the peace of mind that their families are financially protected in case of their unfortunate demise.

TLDR

Employee Deposit Linked Insurance Scheme (EDLI) is a group term life insurance policy administered by the Employee Provident Fund Organization (EPFO) that provides financial protection to employees’ families in the event of the employee’s death. The scheme is linked to the employee’s Provident Fund (PF) account, and the employer is required to contribute 0.5% of the employee’s monthly PF wages towards the scheme, subject to a maximum of Rs. 75 per month. The nominee or legal heir is entitled to a sum assured equal to 20 times the average monthly PF wage of the employee during the preceding 12 months, subject to a maximum of Rs. 7 lacs, in case of the employee’s death.

The benefits of the EDLI scheme are numerous. It provides financial security to the employee’s family, is cost-effective, helps attract and retain talented employees, reduces the financial burden on the employer, and is easy to administer. All employees who are members of the EPF scheme are eligible for the EDLI scheme, including permanent, temporary, and contractual employees.

EDLI scheme is a beneficial initiative that helps employers ensure the financial well-being of their employees and their families. By opting for the EDLI scheme, employers can demonstrate their commitment to employee welfare, while employees can have the peace of mind that their families are financially protected in case of their unfortunate demise. The increasing awareness of the importance of employee welfare makes the EDLI scheme an attractive option for both employers and employees alike.

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