Employee Deposit Linked Insurance Scheme 2018 – What are the Amendments?
Few days back there was some good news for Employees from EFPO. Govt of India has announced that EPFO Life Insurance has enhanced the minimum life insurance limit for employees. Many of us do not even know that there is EPF Life Insurance and we are covered as part of the EPF. As per recent guidelines, all employees are eligible for enhanced minimum assurance benefit from 15th February, 2018. What is Employee Deposit Linked Insurance Amendment Scheme (EDLI) 2018 all about? What is the enhanced minimum assurance amount as per Employee Deposit Linked Insurance (EDLI) Amendment Scheme 2018? Does this EDLI Benefits apply to all private sector employees?
What is Employee Deposit Linked Insurance Scheme / EDLI Scheme?
All members of Employees Provident Fund (EPF) are automatically eligible and covered under EDLI Scheme. The Employees’Deposit-Linked Insurance Scheme (EDLI), 1976 provides for an “Assurance benefit” where an insurance cover to be paid to the employees nominee on death during their working life. It’s a payment linked to the average balance in the provident fund account of an employee, payable to a person belonging to his family in the event of death of the employee while being a member of the Fund.
Features of Employee Deposit Linked Insurance (Amendment) Scheme 2018
While Employee deposit linked Insurance is old scheme, let me cover all features including amendments.
1) EDLI scheme is applicable to employees (private organizations) who are registered under EPF.
2) All such employees are automatically covered under EDLI Scheme. No separate application required.
3) EDLI Scheme covers all employees irrespective whether they are working or retired. They should be member of the EPF.
4) EDLI Scheme covers employees at all times i.e. whether they are working or during non working hours.
5) Good part is that there is no exclusions in this scheme.
6) Life Insuranace coverage would be based on basic salary (Basic Salary + DA) of the employee and not gender or any tenure.
7) Life Insurance coverage is applicable even for new employees on day-1 once they are enrolled in EPF.
8) Minimum Life Insurance coverage is Rs 2.5 Lakhs.
9) Maximum Life Insurance coverage is Rs 6 Lakhs.
10) There is no separate nomination required in EDLI Scheme as EPF nomination is applicable to Life Insurance nomination too.
11) One should note that the average wage referred is basic salary + dearness Allowance (DA) only.
Who Pays EPF Life Insurance / EDLI Scheme Premium?
1) Employee Contribution of Rs 12% would go to EPF. However, employer contribution goes as follows:
– 8.33% goes to EPS
– 3.67% goes to EPF
– 0.51% goes to EDLI Premium and admin charges
– 0.85% goes to EPF Admin charges
Means, premiums are paid by employers in EDLI Scheme.
How does EDLI Scheme / EPF Life Insurance Coverage computed?
1) Employer contributes for EPF Life Insurance premium for maximum of 0.5% of Rs 15,000 of monthly basic average wage in the last 12 months. Means maximum premium payable by employer is Rs 15,000 x 0.5% i.e. Rs 75 per month.
2) EPF Life Insurance coverage is calculated based on average monthly basic wages drawn (Max of Rs 15,000 per month) during the last 12 months preceeding the month where the employee died is multiplied by 30 times and to that 50% addition to the average balance maintained earlier or lowest in their membership account whichever is earlier.
3) The minimum life insurance amount is Rs 2.5 Lakhs and maximum amount payable is Rs 6 Lakhs.
How EPF Life Insurance computed? – Explained with an example-1
Mr.Praveen is an employee in X Company. He was drawing monthly basic average wage of Rs 20,000 and his provident fund balance was Rs 2 Lakh. However, in the last 12 months or in the membership period, the average EPF balance was Rs 1.5 Lakhs only. Due to unfortunate death of Mr.Praveen, his nominee would get the following. Since the maximum monthly wages computed for EDLI Scheme is Rs 15,000, the wage of Rs 20,000 per month would be ignored.
Part-1 – Monthly wage x 30 times – Rs 15,000 x 30 times = Rs 4.5 Lakhs.
Part-2 – 50% of average balance in EPF Rs 1.5 Lakhs = Rs 75,000
Total Life Insurance (EDLI) amount is Rs 4.5 Lakhs + Rs 75,000 = Rs 5.25 Lakhs.
His nominee would get Rs 7.25 Lakhs (Incl Rs 2 Lakhs of EPF amount).
EPF Life Insurance – Explained with an example-2
Mr.Ramesh is an employee in Y Company. He was drawing monthly average wage of Rs 10,000 and his provident fund balance was Rs 1 Lakh. However, in the last 12 months or in the membership period, the average balance was Rs 70,000 only. Due to unfortunate death of Mr.Ramesh, his nominee would get the following.
Part-1 – Monthly wage x 30 times – Rs 10,000 x 30 times = Rs 3 Lakhs.
Part-2 – 50% of average balance in EPF Rs 70,000 Lakhs = Rs 35,000
Total Life Insurance (EDLI) amount is Rs 3 Lakhs + Rs 35,000 = Rs 3.35 Lakhs.
His nominee would get Rs 4.35 Lakhs (Incl Rs 1 Lakh of EPF amount).
What is change in EPF Life Insurance / EDLI Scheme?
1) The minimum life insurance amount is increased now from Rs 1.5 Lakhs to Rs 2.5 Lakhs.
2) The maximum life insurance amount is Rs 6 Lakhs which is unchanged.
3) The new enhanced minimum life insurance coverage is effective from 15th February, 2018.
40 According to the EPF notification, such provisions will be in force for a period of two years from the date of publication of this Scheme in the Official Gazette, i.e., February 15, 2018 onwards.
Conclusion: Many of the employees do not even know that there is something EPF Life Insurance. The amended minimum life insurance coverage is definitely a good news for EPF investors.
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Employee Deposit Linked Insurance Scheme 2018 – What are the Amendments