Employee Deposit Linked Insurance (EDLI)

Employee Deposit Linked Insurance (EDLI) Scheme: A Complete Guide

Employee Deposit Linked Insurance (EDLI) Scheme is an insurance cover provided by the Employees Provident Fund Organization (EPFO) specifically for private sector salaried employees who are members of EPFO. Established in 1976, this mandatory insurance scheme operates under the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952. The scheme functions as a term life insurance plan that provides financial security to the families of employees in the event of their death during service.

The EDLI scheme was introduced with the primary objective of extending life insurance benefits to private sector employees for whom such benefits were not commonly provided by employers. It serves as a social security measure aimed at ensuring financial assistance to the family members of EPFO subscribers in case of the employee’s unfortunate demise.

Under the legal framework, the EDLI scheme applies to all factories and establishments registered under the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952. However, there is a specific exemption for tea factories in the State of Assam. Organizations covered under this Act must mandatorily subscribe to this scheme and provide life insurance benefits to their employees.

The administration of the EDLI scheme falls under the purview of the Central Board constituted under section 5A of the Employees’ Provident Fund and Miscellaneous Provisions Act. This ensures proper governance and implementation of the scheme across all eligible organizations.

In terms of benefits, the EDLI scheme provides what is officially termed as “assurance benefit,” which is a payment linked to the average balance in the Provident Fund Account of an employee. This benefit is payable to the deceased employee’s family members or nominees in the event of the employee’s death while being a member of the Fund. The benefit amount is calculated based on the employee’s last drawn salary.

Additionally, the EDLI scheme works in conjunction with two other major employee benefit programs – the Employees’ Provident Fund (EPF) and the Employees’ Pension Scheme (EPS). Together, these three schemes form a comprehensive social security framework for private sector employees in India.

An important aspect of the EDLI scheme is that there are no exclusions under this insurance coverage. This means that regardless of the cause of death, the nominee receives the benefit, making it a comprehensive protection plan for employees.

The contribution structure for the EDLI scheme involves payments from both employers and the Central Government as stipulated under sub-section (2) and sub-section (3) of section 6C of the Act. These contributions are calculated based on the employee’s basic wages, dearness allowance (including the cash value of any food concession), and retaining allowance actually drawn during the month.

For claim settlement, the nomination made by an employee under the Employees’ Provident Funds Scheme, 1952, or under the provident fund exempted under section 17 of the Act, is treated as nomination under the EDLI Scheme. The assurance amount becomes payable to such nominee or nominees upon the death of the employee.

Key features of the EDLI scheme

The EDLI scheme offers comprehensive financial protection with several distinctive features that make it a valuable social security component for EPF members. First and foremost, the scheme operates on employer-only contributions, with employees not required to make any payments toward the insurance coverage. This makes the EDLI scheme entirely free for all employees while providing substantial death benefits.

Employers contribute 0.5% of each employee’s basic salary (plus dearness allowance) toward the EDLI scheme, with contributions capped at a maximum of Rs. 75 per employee per month. These contributions are calculated alongside regular EPF contributions and are mandatory for organizations registered under the EPF Act.

As per the latest provisions, the maximum insurance benefit under the EDLI scheme stands at Rs. 7 lakh. This represents a significant enhancement from previous limits, as the benefit calculation follows a formula of 35 times the average monthly salary in the past 12 months. Moreover, the scheme includes an additional bonus component of Rs. 1.75 lakh, further increasing the financial support provided.

To ensure adequate support even for lower-salaried employees, the EPFO has established a minimum benefit amount of Rs. 2.5 lakh. This minimum threshold applies retrospectively from February 2020, guaranteeing substantial support regardless of the employee’s salary level.

A notable aspect of the EDLI scheme is its universal coverage without exclusions. The insurance benefit applies to all causes of death, providing 24/7 worldwide protection. Furthermore, there is no minimum service period requirement for availing of EDLI benefits. This feature ensures immediate coverage for new employees from the day they join an EPF-registered organization.

All EPF members are automatically enrolled in the EDLI scheme. Nevertheless, it’s important to note that the coverage remains active only while the employee maintains an active EPF membership. Once an employee leaves service with an EPF-registered company, the EDLI coverage ceases, and family members cannot claim benefits after separation from employment.

For salary calculations under the EDLI scheme, the dearness allowance must be added to the basic salary, with a maximum monthly wage ceiling of Rs. 15,000. This wage ceiling effectively caps the maximum benefit available under the scheme.

Notably, employers have flexibility regarding insurance provision. They can opt out of the EDLI scheme if they implement an alternative group insurance scheme for employees, provided the benefits offered equal or exceed those available under EDLI. This provision allows organizations to customize their employee insurance benefits while ensuring minimum protection standards.

The claim amount is payable to the family members, legal heirs, or nominees of the deceased employee. For this purpose, the nomination made under the EPF scheme automatically serves as the nomination for EDLI benefits, streamlining the claim process for bereaved families.

Who is eligible for EDLI coverage?

Eligibility for the EDLI scheme operates on two levels – organizational qualification and individual employee criteria. All establishments registered under the Employees’ Provident Fund and Miscellaneous Provisions Act of 1952 automatically qualify for EDLI coverage. Consequently, organizations that are mandated to provide Employees’ Provident Fund (EPF) benefits must also enroll in the EDLI scheme.

Primarily, organizations with more than 20 employees are required to participate in the EDLI scheme. Once an organization meets this threshold, all its employees who are EPF members receive automatic enrollment in the insurance program. This mandatory participation ensures widespread coverage across the private sector workforce.

For individual employees, eligibility is tied to their EPF membership status. Employees whose basic salary is up to Rs.15,000 can subscribe to this scheme. When an employee’s salary exceeds Rs.15,000, they remain eligible for coverage, but the maximum benefit payable is capped according to established limits. Currently, employees with higher salaries can receive a maximum benefit of up to Rs.7 lakhs under the scheme.

According to official regulations, the EDLI scheme applies to employees of all factories and other establishments covered under the EPF Act, with a specific exemption for tea factories in the State of Assam. This broad application ensures comprehensive coverage across various industries and sectors.

Recent reforms have significantly expanded eligibility criteria. As per notifications dated July 18, 2025, the EPFO has eased several requirements that previously limited access to benefits. These changes modify Paragraph 22 of the original EDLI Scheme established in 1976.

One crucial modification addresses continuity of service requirements. The revised rules clarify that a gap of up to 60 days between two jobs will not break continuity of service. This means employees changing jobs with breaks shorter than two months can have multiple employment periods counted together when calculating the 12-month continuous service previously required for benefit eligibility.

In addition, employees who die within 6 months of making their last PF contribution while still on their employer’s payroll now qualify for EDLI benefits. Previously, such cases were ineligible unless there was continuous contribution until the time of death.

The revised guidelines also establish a minimum assured benefit of Rs.50,000, payable despite employment gaps, low PF balance, or death occurring within 6 months of the last contribution. This floor amount ensures basic financial protection for all covered employees’ families, regardless of specific circumstances.

To maintain eligibility, employers must fulfill specific administrative requirements. These include submitting a consolidated return to the Commissioner within fifteen days of the commencement of the scheme. This return must contain details of eligible employees, including their Insurance Scheme Number, name, and accumulations.

Employers must also ensure proper documentation of employee nominations. The nominations executed by employees under the Provident Fund rules automatically apply to the EDLI scheme. This streamlined approach simplifies the administrative process while ensuring clear designation of beneficiaries.

How is the EDLI benefit calculated?

The EDLI benefit calculation involves a complex formula that determines the lumpsum payment to nominees or family members of deceased employees. The calculation method has evolved over time, with several revisions increasing the maximum benefit amount.

EDLI calculation formula

EDLI calculations utilize two distinct formulas, with beneficiaries receiving the higher amount between them. The first formula (Part A) is based on the Average Progressive Balance (APB) in the employee’s EPF account during the 12 months preceding death. This calculation follows:

• For APB up to Rs. 50,000: Flat Rs. 50,000
• For APB above Rs. 50,000: Rs. 50,000 plus 40% of the amount exceeding Rs. 50,000 (maximum Rs. 1,00,000)

The second formula (Part B) considers the employee’s average wages during the last 12 months, subject to certain conditions. Initially, the calculation used:

• 20 times the average monthly wages (maximum Rs. 6,500) with a ceiling of Rs. 1,30,000

Subsequently, this formula was enhanced to multiply the average monthly wages by higher factors (20, then 30, subsequently 35) depending on the date of death.

For the calculation, wages comprise basic salary plus dearness allowance. The average progressive balance represents the sum of month-wise balances during the preceding 12 months divided by 12.

Maximum payout limit

The maximum benefit under the EDLI scheme has increased substantially over time. Currently, the maximum payout stands at Rs. 7,00,000. This figure represents a significant enhancement from previous limits.

Prior to revisions, the maximum benefit was capped at lower amounts:

• Rs. 1,30,000 (for earlier periods)
• Rs. 3,60,000 (intermediate period)
• Rs. 6,00,000 (before final revision)

For employees with monthly wages exceeding Rs. 15,000, the benefit is calculated as 35 times Rs. 15,000 plus the bonus component. Hence, the calculation becomes (35 × 15,000) + bonus = Rs. 7,00,000.

Alternatively, if an employee’s salary is below Rs. 15,000, for instance Rs. 10,000, the payout would be (30 × 10,000) + bonus = Rs. 5,50,000. This ensures proportional benefits based on actual salary.

Bonus component

The EDLI scheme includes an additional bonus component that enhances the total benefit amount. Originally, this bonus was fixed at 20% of the calculated amount.

The bonus structure has undergone several revisions:

• Initially Rs. 1,50,000
• Increased to Rs. 2,50,000 (effective September 2020)
• Currently stands at Rs. 1,75,000 (effective April 28, 2021)

This bonus is added to the base calculation amount to determine the final benefit payable to nominees. The inclusion of this bonus substantially increases the financial support provided to families of deceased employees.

Importantly, a minimum benefit amount of Rs. 2,50,000 was introduced and applied retrospectively through GSR 299 dated April 28, 2021. This ensures that even employees with lower wages or shorter service periods receive meaningful financial support.

The EDLI calculation system demonstrates the scheme’s focus on providing significant financial protection, with benefits directly proportional to the employee’s salary level, subject to prescribed maximum limits.

How to claim EDLI benefits

Claiming benefits under the EDLI scheme follows a structured process designed to ensure timely disbursement to eligible nominees or legal heirs. The claim procedure must be initiated by family members or nominees following the death of an EPF member through a sequence of clearly defined steps.

Step 1: Fill and submit Form 5 IF

The claim process begins with Form 5 IF, which is the designated application form for EDLI benefits. Each claimant must complete this form separately. For minor claimants, the guardian must fill the form on their behalf. Form 5 IF must include essential details such as:

• Mobile number (for tracking claim status)
• Deceased member’s name and father’s name
• Date of death
• Name and address of the establishment where the member was last employed
• Provident Fund account number
• Claimant’s details including name, date of birth, and relationship with the deceased

Step 2: Attach required documents

Several supporting documents must accompany the completed Form 5 IF:

• Death certificate of the employee
• Bank account details of the nominee (including a canceled cheque)
• Valid ID proof of the nominee
• Guardianship certificate if claiming on behalf of a minor family member
• Succession certificate in case of a claim by legal heirs

In cases where the claim is made for a minor nominee or legal heir, appropriate guardianship documentation becomes essential for processing.

Step 3: Submit to EPFO office

Firstly, the form must be certified by the employer stating that the deceased was an active EPF member. Thereafter, if obtaining the employer’s signature is not possible or if the establishment has closed, the form may be attested by any of these authorized individuals:

• Local MP or MLA
• Bank manager of the employee’s bank
• Gazetted officer
• Magistrate
• Post or Sub-Postmaster
• Member of EPF regional committee or CBT

Upon completion of attestation, the form along with all documents must be submitted to the regional EPF Commissioner’s Office. Claimants may simultaneously submit Form 20 (for EPF withdrawal) and Form 10C/10D to process all applicable benefits concurrently.

Step 4: Track and receive payment

Following submission, the claim undergoes verification by the EPFO. The Commissioner is required to settle claims within 30 days from receipt of a complete application. In case of any deficiency in the claim, it must be communicated to the applicant within 20 days.

Primarily, payment is made through electronic or digital funds transfer to the nominee’s savings account. Should the Commissioner fail to settle a valid claim within the stipulated timeframe without sufficient cause, a penal interest of 12% per annum becomes applicable on the benefit amount until actual disbursement.

Throughout the process, claimants can track the status of their application through the EPFO portal or by contacting the employer.

EDLI vs other group insurance schemes

Under the regulatory framework, employers have alternatives to the standard EDLI scheme. The Employees’ Provident Fund and Miscellaneous Provisions Act allows organizations to opt for different group insurance schemes, provided these alternatives offer benefits equal to or greater than those of EDLI.

Section 17(2A) of the EPF Act explicitly permits employers to discontinue EDLI contributions if they implement superior employee insurance coverage through alternative providers. LIC’s Group Insurance Scheme represents one recognized alternative that Central Provident Fund Commissioner has approved as a suitable replacement.

Alternative schemes typically offer several advantages over the standard EDLI program. These include lower premium costs based on employee age profiles, expedited claim processing with settlements often completed within weeks rather than months, and flexible premium payment options including yearly, half-yearly, quarterly, or monthly schedules.

Coverage options in alternative plans provide greater flexibility. Employers can select flat coverage ranging from Rs. 102,000 to Rs. 200,000 per employee regardless of PF balance, or opt for graded coverage that scales with employee status. Particularly beneficial is immediate coverage for new employees with zero PF balance, who receive minimum insurance protection from day one.

Additional features often unavailable in standard EDLI include optional accident death riders at nominal cost, tax-free claim payments, and higher maximum coverage limits depending on policy terms.

Key Takeaways

The EDLI scheme provides essential life insurance coverage for EPF members, offering financial security to families at no cost to employees. Here are the critical insights every employee should know:

• Automatic free coverage: All EPF members get life insurance up to Rs. 7 lakh with no employee contributions required

• Immediate protection: Coverage starts from day one of employment with no waiting period or service requirements

• Simple benefit calculation: Insurance amount equals 35 times average monthly salary (capped at Rs. 15,000) plus Rs. 1.75 lakh bonus

• Streamlined claims process: Submit Form 5 IF with death certificate and required documents to EPFO within 30 days for settlement

• Universal coverage: No exclusions apply – benefits are payable regardless of cause of death, providing 24/7 worldwide protection

The EDLI scheme serves as a crucial safety net for private sector employees, ensuring their families receive substantial financial support during difficult times. With its employer-funded structure and comprehensive coverage, it represents one of India’s most accessible social security benefits for working professionals.

FAQs

Curious about more HR buzzwords like interview-to-hire ratio, behavioral interview, casual leave, leave encashment, relieving letter, resignation letter or more? Dive into our HR Glossary and get clear definitions of the terms that drive modern HR.

Explore Taggd for RPO solutions.