For crores of employed people, Employees' Provident Fund (EPF) account only means a lump sum amount or old age pension after retirement. But there is a facility associated with this savings account, about which most of the employees are not aware. This facility is free life insurance up to Rs 7 lakh. If you are a member of EPF, you are 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. This insurance is completely done by the company.

What is EDLI scheme?

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 (Employee Pension Scheme). As the name suggests, it is linked to your PF account. As long as you are an active member of EPF, you are covered under this insurance cover.

Often people think that if there is insurance, there will be a premium also. But it is not so in this case. The entire premium of this scheme is paid by your company i.e. your employer. According to the rules, the employer deposits 0.5% of your salary (Basic + DA) every month in the EDLI scheme. There are no deductions 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 cover to crores of employees working in the organized sector.

When is this claim of up to Rs 7 lakh available?

This insurance cover becomes active in case of death of the employee during his service period. That is, if an employee unfortunately passes away while on the job (be it in office, at home or on leave), then this insurance amount is given to his family or nominee. This scheme is important because it provides immediate relief to a family in case of 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 last 12 months of the employee and the balance deposited in his PF account. The benefit of this scheme is available to every employee whose PF is deducted. It does not matter whether you are a permanent employee or working on contract. If you have a PF account, you are a member of EDLI. However, this scheme does not apply to the tea garden employees of Assam, there are separate provisions for them.

What are the rules on company negligence?

EPFO has made strict rules regarding this scheme, so that the interests of the employees can be protected. It is solely the responsibility of the employer to timely deposit 0.5% EDLI contribution for each of its employees. If an employer fails to do so or is negligent, a penalty at the rate of 1% per month is imposed. The employer has to pay this fine from his own pocket, which he cannot recover from the employee.

However, in certain circumstances, such as when the company is going through a serious financial crisis or there are major management problems, the board may reduce or even waive these penalties, but this is an exception. The main objective of the scheme is to ensure that there is no hindrance in getting financial assistance to the employee's family in times of need. The claiming process is also quite straightforward. There is a provision to pay the insurance amount within 20 days if the claim is made by the nominee or legal heir.

This is the complete calculation of Rs 7 lakh

Now the most important question is how this maximum amount of Rs 7 lakh is decided? 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 is based 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 the balance in the 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 PF balance portion is Rs 1.75 lakh. Thus, (Rs 15,000 x 35) = Rs 5,25,000 + Rs 1,75,000 = Rs 7,00,000.