For millions of employed people, the Employees' Provident Fund (EPF) account simply means a lump sum after retirement or a pension for old age. However, this savings account comes with a benefit that most employees are unaware of. This benefit is free life insurance up to ₹7 lakh. If you are an EPF member, you are covered under a special scheme of the Employees' Provident Fund Organization (EPFO) that provides financial security to your family. This benefit is called the Employee Deposit Linked Insurance (EDLI) scheme. The most significant feature of this scheme is that no penny is deducted from the employee's salary. This insurance is entirely borne by the company.

What is the EDLI scheme?
EDLI, or the Employee Deposit Linked Insurance, is a life insurance policy offered by the EPFO ​​to all its members. It is the third major benefit, along with EPF and EPS (Employee Pension Scheme). As the name suggests, it's linked to your PF account. As long as you're an active EPF member, you're covered by this insurance.

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People often assume that if there's insurance, there's a premium. But that's not the case. The entire premium for this scheme is paid by your company, your employer. As per the rules, the employer contributes 0.5% of your salary (basic + DA) every month to the EDLI scheme. There's no deduction from the employee's salary, so it's completely free. This scheme was launched to provide a basic social security cover to millions of employees working in the organized sector.

When is this claim of up to ₹7 lakhs received?
This insurance cover is activated upon the employee's death during their service period. That is, if an employee unfortunately passes away while employed (whether in the office, at home, or on leave), this insurance amount is paid to his or her family or nominee. This scheme is important because it provides immediate relief to a family in case of a sudden financial crisis.

The minimum amount available under this scheme is ₹2.5 lakh, and the maximum is ₹7 lakh. This amount is determined based on the employee's salary for the last 12 months and the balance in their PF account. This scheme benefits every employee whose PF is deducted. It does not matter whether you are a permanent employee or working on a contract. If you have a PF account, you are a member of EDLI. However, this scheme does not apply to tea garden workers in Assam; they have separate provisions.

What are the rules on company negligence?
EPFO has established strict rules regarding this scheme to protect the interests of employees. It is the employer's sole responsibility to deposit the 0.5% EDLI contribution for each employee on time. If an employer fails to do so or is negligent, a penalty of 1% per month is imposed. The employer has to pay this penalty out of their own pocket, which they cannot recover from the employee.

However, in certain circumstances, such as if the company is facing a severe financial crisis or there are major management problems, the board may reduce or waive these penalties, but this is an exception. The main objective of the scheme is to ensure that the employee's family does not face any obstacles in receiving financial assistance in times of need. The claim process is also quite straightforward. The insurance amount is paid within 20 days of the claim 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 determined? The insurance amount is calculated in two parts. The first part is based on the employee's average monthly salary for the last 12 months, and the second part is based on the amount deposited in his or her PF account.

The calculation formula is as follows: (average monthly salary for the last 12 months x 35) + (50% of the PF account balance). It is important to note that the maximum limit for calculating the average monthly salary is Rs 15,000. Similarly, the maximum limit for the 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.

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