Overview
Deposit Linked Insurance refers to the Employees’ Deposit Linked Insurance (EDLI) scheme, which is a life insurance cover provided to employees as part of the EPF (Employees’ Provident Fund) framework. Introduced in 1976, EDLI ensures that in the event of the death of an employee (who is a member of EPF) during their service, their nominated beneficiaries receive a lump-sum insurance payout. The scheme is “deposit linked” because the benefit is linked to the balance in the employee’s provident fund account, or more precisely, their last drawn salary. EDLI, together with EPF and EPS (pension), forms a trio of benefits for employees in the organized sector, administered by EPFO. All employers who are covered under the EPF Act must also provide EDLI coverage to their employees (unless they have obtained an exemption by offering a superior life insurance scheme).
Key Features of EDLI Scheme
• Automatic Coverage: Any employee who is a member of the EPF is automatically covered by EDLI – there is no separate enrollment needed and no contribution from the employee. The coverage continues as long as the employee is in service and contributing to PF. If they switch jobs, the new employment (if still under PF) continues the coverage. If an employee has multiple jobs over time, it’s continuous coverage as long as PF is maintained, even if PF accounts are transferred.
• Contribution: Employers contribute to the EDLI fund on behalf of employees. The EDLI contribution is set at 0.5% of the employee’s monthly wages, up to the wage ceiling (which is the same as EPF’s, ₹15,000). That means the maximum EDLI contribution per employee per month is ₹75 (0.5% of 15,000). There is no contribution required from employees for EDLI. Additionally, the employer pays an EDLI administrative charge (currently a nominal 0.005% of wages). These contributions are typically remitted along with the EPF contributions in the combined monthly challan to EPFO.
• Benefit Amount: The insurance payout under EDLI is determined by the employee’s salary and a formula. The benefit is generally 35 times the “applicable” monthly wage (normally basic + DA, capped at ₹15,000) plus a bonus amount as declared under the scheme. As of recent updates, the maximum benefit is capped. In 2016, the cap was raised to ₹6 lakh (i.e., if wage is ₹15,000, 30x gave 4.5 lakh plus a bonus of 1.5 lakh = 6 lakh max). In 2021, the government further increased the maximum EDLI benefit to ₹7 lakh. The bonus component can change by notifications (it was ₹1.5 lakh at one point). So effectively, if an employee’s last drawn PF wage is ₹15,000 or more, their nominee would get the maximum ₹7 lakh. If the wage is lower, say ₹10,000, then 35 x 10,000 = ₹3.5 lakh plus bonus (for instance ₹1.75 lakh if formula fits) making it something like ₹5.25 lakh. There’s also a provision that the benefit cannot be less than a certain minimum (for a while a minimum of ₹2.5 lakh was considered during 2020 due to COVID deaths, as a temporary measure).
• Conditions: To claim EDLI benefit, the employee must have been an active EPF member in the last 12 months before death. Actually, even if not continuous, as long as they were contributing some time in that period, the claim can be made. If the member had left one job and had not yet joined another, technically if the death happens within that window and the PF account still exists, I believe EDLI may still cover if contributions made 12 months prior (there are some detailed rules on what constitutes in-service). But broadly, if an employee dies while currently employed and covered by PF, EDLI applies. The claim has to be made by the nominee (or legal heir) via the employer typically, using Form 5(IF).
Compliance and Employer’s Role
Employers must ensure compliance with EDLI as part of their PF obligations:
• No Opt-Out unless Exempted: An establishment can opt out of the EDLI scheme only if they have taken a Group Insurance scheme from an insurance provider that offers equal or better life insurance benefits to employees, and they obtain a formal exemption from the EPFO for EDLI. Many large companies do take group term life insurance for their employees (often covering 2-5 times annual salary, which usually exceeds EDLI’s cover), and they can apply to EPFO for exemption so that they don’t have to pay EDLI 0.5% (though they usually still pay something comparable as premium to insurer). However, if no exemption is taken, the employer must contribute to EDLI for all employees and EDLI by default covers them.
• Contribution Payment: As mentioned, employers include EDLI contributions in the monthly PF payment. They need to ensure they calculate it correctly (which is straightforward at 0.5% of wages up to ₹15k). With unified PF challan, usually they just input employee wages and the system calculates EDLI and other breakdowns. Prompt payment ensures employees are covered; if an employer defaults on PF/EDLI contributions and an employee death occurs, EPFO may still honor the claim (employee shouldn’t suffer for employer lapse), but EPFO will hold the employer liable for the dues with damages.
• Nomination Forms: It’s crucial that employees fill out the PF nomination (Form 2) upon joining, which covers nomination for EPF, EPS, and EDLI all three. The employer’s HR should encourage and ensure nominations are up to date (especially if an employee gets married or has children, they might want to update nominees). This avoids legal complications in claims, as the money should go to the intended beneficiary.
• Facilitating Claims: In the tragic event of an employee’s death, the employer (specifically the HR or accounts dept) should assist the nominee or family in filing the EDLI claim. This involves certifying the claim form, ensuring that the PF account details and KYC of nominees are in order, and coordinating with EPFO. The claim usually requires attaching the death certificate, nomination proof, and sometimes succession certificate if no nomination. Swift processing is in everyone’s interest; EDLI claims, when all documents are in order, are usually settled relatively fast by EPFO.
Importance and Benefits
For employees, EDLI is a significant benefit as it provides a measure of financial security to their families. While ₹6-7 lakhs may not completely cover the loss of income from a breadwinner, it can be a critical support, especially for lower-salaried employees for whom this could be several years’ worth of pay. Since employees themselves don’t contribute to it or even think about it (many employees are not even aware they are insured through EDLI), it’s a silent safety net.
From an HR perspective, highlighting EDLI (and any additional company-provided life insurance) is good for showing the total reward and benefits package to employees. For compliance officers, ensuring EDLI contributions and paperwork are correct is necessary to avoid any liability.
The EDLI scheme, being government-managed, means claims are paid out from a central pool. EPFO periodically revises the benefits or coverage. As of 2025, with the maximum at ₹7 lakh, discussions sometimes happen on raising the wage ceiling or benefit further to match inflation and salary growth. Until any such changes, the current framework stands. When the Code on Social Security comes into effect, EDLI will continue as one of the social security schemes under it, possibly with flexibility to increase coverage or provide similar insurance to more categories of workers. But at present, for any EPF-covered employee, EDLI is an assurance that their dependents have an insurance fallback at no cost to the employee, only a small cost to the employer.
