Employee Deposit Linked Insurance Policy (EDLI)
Nowadays, most organizations offer the facility of provident fund (PF). PDF (Employees’ Provident Fund Scheme 1952) and EPS (Employees’ Pension Scheme 1995) are the two different retirement saving schemes under Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, meant for salaried employees. It is mandatory for every employee drawing the minimum monthly basic pay (as stated in the Act, however, are revised from time to time) to make a contribution towards EPF & EPS.
However, employees drawing above the minimum monthly basic salary have an option to get PF deducted from their salary. The EPF & MP Act, 1952 provided for PF and a Family Pension Scheme for employees from 1971 onwards.
However, it was felt that challenges arising out of the early death of the employee were left unaddressed. In view of this, the Act was amended to incorporate an insurance scheme, called the Employees’ Deposit Linked Insurance (EDLI) Scheme in 1976.
The objective of EDLI was to put in place a mechanism to provide employees with families with income security after the death of the member. It was funded through contributions by the employer and Central Government with no contribution by the employee. EDLI scheme provides for a lump sum payment to the insured’s nominated beneficiary in the event of death due to natural causes, illness, or accident.
EDLI scheme applies to all the factories and establishments to which the EPF & MP Act, 1952 applies. In short, all employees who join the Employees’ Provident Fund are covered by the EDLI. The EDLI cover applies worldwide and 24-hours a day. There are no exclusions under this policy.
The scheme has undergone several changes since its introduction. The Central Government no longer contributes to the scheme and the benefits have also been changed many times. The contributions thus come only from the employers.
Since the life cover provided under EDLI is comparatively low, the Central Government has provided that against the EDLI scheme, an employer can approach a Life Insurance company for better cover to employees. The employer also has the choice to opt for a higher Sum Assured for the employees. In this case, the EPFO (Employees’ Provident Fund Organisation) exempts an employer/company from EDLI. This scheme is called the Group Insurance Scheme.
As of date i.e. 01/04/2020, it is mandatory for the employers to have a minimum insurance cover for Rs 6.0 lacs for each subscriber under EPF. Our experience suggests that the Group Insurance Scheme offered by Life Insurers is more cost-effective and efficient than that offered through PF Dept. However, there are many employers/companies, have opted for higher cover than the mandated minimum insurance cover, suggested for Rs 10.0 lacs / Rs 20.0 lacs, benefiting the employees.
