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Provident Fund (PF) deduction is recorded every month in the salary slips of crores of salaried employees working in private and organized sector. Most working people see PF only as a savings scheme or retirement fund, where annual interest of more than 8 percent is available. But very few employees and their families are aware that as soon as the PF account is opened, the employee automatically gets free life insurance cover up to Rs 7 lakh from the Central Government. The name of this life saving scheme is ‘Employees Deposit Linked Insurance Scheme’ (EDLI Scheme 1976). This scheme, run by the Employees Provident Fund Organization (EPFO), is applicable to every employee in the organized sector, whose EPF contribution is deducted. Lakhs of employees in industrial centers across the country—be it Delhi-NCR, Noida, Gurugram or cities like Lucknow, Kanpur, Ghaziabad in Uttar Pradesh—are covered under this scheme. If the employee dies untimely due to any reason during the service period, this insurance amount is given to his nominee or legal heir in lump sum directly in his bank account.
Generally, when a person buys a term insurance or life cover worth Rs 5 to 10 lakh from the market, he has to pay a huge premium of thousands of rupees every month or annually. But the most unique and welfare feature of the EDLI scheme is that not a single penny is deducted from the employee’s salary. Its entire expense is borne by the employer i.e. the company. According to the rules, 12 percent of the employee’s basic salary and dearness allowance (DA) is deposited in the EPF account. The employer also contributes equal to the employee i.e. 12 percent. However, the employer’s 12 per cent contribution is divided among different funds. Out of this, 8.33 percent goes to the Employee Pension Scheme (EPS) and 3.67 percent is deposited in EPF. Additionally, the company deposits an additional contribution of 0.50 per cent of the employee’s basic salary (maximum Rs 75 per month) into the EDLI fund from its own pocket. Thus, this insurance is completely cashless and 100% free to the employee.
The claim amount received under the EDLI scheme is not an arbitrary figure, rather EPFO has fixed a transparent and scientific formula for it. Under this scheme, the minimum sum insured is Rs 2.5 lakh and the maximum sum insured is Rs 7 lakh. The claim is calculated on the basis of the employee’s average basic pay (Basic + DA) of the last 12 months and the average balance of his PF account. Under the current rules, the maximum limit of salary is considered to be Rs 15,000 per month.
The calculation formula is as follows: Sum Assured = (Employee’s average monthly salary of last 12 months × 35) + (50% of PF balance of last 12 months, maximum Rs 1.75 lakh)
For example, if the average basic pay of an employee is Rs 15,000, then the first part will be Rs 15,000 × 35 = Rs 5,25,000. After this, if there is sufficient balance in the employee’s PF account, then a maximum of Rs 1,75,000 will be added as 50 percent bonus amount. Adding these two amounts, the total claim amount becomes Rs 7,00,000 (5,25,000 + 1,75,000). Even if an employee’s salary is low, an assured payment of a minimum of Rs 2.5 lakh is made to his dependents.
There are many misconceptions spread among employees and their dependents regarding EDLI claim. The most common misconception is whether insurance money is payable only if an accident occurs at the workplace (on-duty)? EPFO rules are completely clear and humane in this matter. Whether the employee dies while on duty, at home, due to natural disease, in an accident or during treatment in the hospital – this insurance cover is fully valid in all circumstances. The only basic condition is that the employee should be in active service in an EPF-registered institution at the time of death. The second important condition is related to service period. The employee must have completed at least 12 months (1 year) of continuous service before death. The biggest relief in this is that it is not mandatory to have 12 months of service in the same company. If the employee has changed one or two companies during the last 12 months, but his Universal Account Number (UAN) remains the same and there has been no long break in PF service, he is still fully entitled to this entire cover of Rs 7 lakh.
The claim process has been made very simple to provide financial support to the family members of an employee after his untimely death. To make a claim, the nominee has to fill ‘Form 5 IF’ of EPFO. This form can be processed both offline and online. The family members have to fill this form and submit it to the company or employer where the employee was last employed. The authorized officer of the company signs and stamps it and forwards it to the concerned regional EPFO office. If for some reason the company is closed or the employer is not cooperating, then the form can be submitted directly to the PF office after getting it verified by the bank manager, gazetted officer, village head or municipal councilor.
List of documents required for claim:
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Original Death Certificate of the employee
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Claim Form 5 IF (For EDLI Insurance)
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Form 20 (to withdraw money from PF account)
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Form 10D or 10C (to receive pension benefits)
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Aadhar card and PAN card of the nominee or dependent
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Canceled check of the nominee’s bank account or certified copy of the bank passbook (which should clearly show the name, IFSC code and account number)
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If no nominee is registered, then Succession Certificate issued by a competent court.
EPFO repeatedly instructs all its members to complete ‘E-Nomination’. The biggest reason for this is that if the name of the nominee is registered in the PF account, then after the death of the employee, the entire money goes directly to that person without any legal hassle. If e-nomination is not done, the family members have to make rounds of the courts to prove that they are the legitimate heirs. Months of time and thousands of rupees are wasted in lawyers’ fees in getting the succession certificate made. The process of e-nomination can be completed in just 5 minutes sitting at home. For this, the employee has to login to EPFO’s Member Service Portal (unifiedportal-mem.epfindia.gov.in) with his UAN and password. Go to ‘Manage’ tab and click on ‘E-Nomination’ option, upload Aadhaar number, bank details and photo of your family members (wife, child or parents) and e-sign through Aadhaar OTP. As soon as the nomination is filed, your family is protected from all future financial crises.
As per the Citizen Charter of EPFO, it is mandatory to settle the insurance claim within 30 days of submission of the form with all the required documents. If the PF office keeps the claim pending for more than 30 days without any solid legal reason, there is a strict rule to pay the nominee along with interest at the rate of 12 percent per annum for the period after the 30th day. Generally, due to digital system and Aadhaar linking, this claim is sent directly to the nominee’s account through NEFT within 7 to 15 working days. The claim status can be tracked in real-time through the ‘Track Claim Status’ option on the official portal of EPFO. In case of any delay or problem, a direct complaint can be lodged on EPFO’s Grievance Portal (EPFiGMS) or toll-free number 14470.