PF account holders also receive life insurance benefits. The Employees’ Provident Fund (EPF) is a product designed as a savings-plus-pension-plus-life insurance solution. Under the EDLI scheme, employees receive automatic life insurance coverage.
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While there’s a lot of discussion about the money deposited in a Provident Fund (PF) account and the pension it provides, many people aren’t even aware of its third benefit. Did you know that all salaried individuals with an account with the Employees’ Provident Fund Organization (EPFO) are automatically insured, without paying any premium? Yes, it’s absolutely true that employees receive life insurance benefits without a single rupee being deducted from their salary. Let’s learn about the life insurance benefits available to PF account holders.
EPFO Provides Automatic Life Insurance
EPFO, which manages PF accounts, provides automatic life insurance to salaried individuals working in the private sector. This is called the Employees’ Deposit Linked Insurance (EDLI) scheme. According to the rules, all EPF members are automatically eligible for this scheme. However, the premium is paid by the employer, not the employee. However, employers never even mention paying the EDLI premium.
Employees receive life insurance absolutely free.
In fact, the premium amount for the EDLI scheme is very small. According to the rules, the maximum monthly premium can be only ₹75. The premium is determined based on the employee’s basic salary. The EDLI scheme premium is only 0.5% of the basic salary. The rule also stipulates that the EDLI scheme premium can only be paid on a basic salary of ₹15,000. Therefore, the premium for ₹15,000 is ₹75, which is the maximum limit for the EDLI scheme.
Family members can receive up to ₹2.5 lakh to ₹7 lakh.
This life insurance benefit, available on the PF account, is passed on to the family members of the employee upon their death while in service. Fortunately, the cause and location of death are independent of the insurance amount payment. If an employee has been employed for the past 12 months and dies for any reason, whether in the country or abroad, their family will receive the insurance amount. This amount can be up to a maximum of ₹7 lakh. Let’s figure it out.
Know the PF insurance amount calculation
The amount of insurance money that the deceased’s family will receive depends on the deceased’s last salary and the average balance in their PF account over the past 12 months. According to the rules, a minimum of ₹2.5 lakh is given, with a maximum of ₹7 lakh. There is a fixed formula for calculating the amount a deceased’s family will receive, ranging from ₹2.5 lakh to ₹7 lakh.
30 × (average basic salary for 12 months, which can be a maximum of ₹15,000) + bonus. The bonus amount is also fixed at ₹2.5 lakh. Therefore, even if an employee has no money left in their account, they will still receive at least ₹2.5 lakh as bonus. Similarly, if an employee has deposits in his account up to the maximum limit of basic salary of Rs 15,000, then on his death, his family will get (30 × ₹15,000) + ₹2,50,000 = ₹4,50,000 + ₹2,50,000 = ₹7,00,000.
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