Employees are a company’s most valuable asset, and their well-being is paramount. As an employer, it’s your responsibility to provide them with financial security in unforeseen circumstances.
The mandatory EDLI scheme offers a basic level of life insurance coverage. However, employers can enhance employee benefits by opting for Group Term Life Insurance in lieu of EDLI. This blog delves into the details of both schemes and highlights how Group Term Life Insurance can offer greater advantages.
What’s on this page?
Understanding EDLI
- What is EDLI? The Employees’ Deposit Linked Insurance Scheme (EDLI) is a government-mandated life insurance plan for employees covered under the Employees’ Provident Fund (EPF) Scheme. It offers a lump-sum death benefit to the employee’s family in case they pass away while in service.
- How did it come to be? The EDLI scheme was introduced in 1976 with the aim of providing social security to the families of employees in the organised sector.
Group Term Life Insurance
What is it?
Group Term Life Insurance is a type of life insurance policy that provides coverage to a group of people, typically employees of a company. The employer purchases a master policy that covers all eligible employees under a single contract.
Benefits over EDLI
Higher coverage: Group Term Life Insurance can offer significantly higher sum assured amounts compared to the revised EDLI scheme, providing greater financial security for employees’ families.
Customization: These policies can be tailored with add-on riders like accidental death, disability, or critical illness benefits, allowing employers to choose the most suitable coverage for their employees.
Tax benefits: Premiums paid by employers for Group Term Life Insurance qualify for tax deductions.
| Scheme | Advantages | Disadvantages |
| EDLI | Guaranteed coverage for all employees; Employer-paid premiums | Limited sum assured; No customization options |
| Group Term Life Insurance | Higher sum assured; Flexible coverage with riders; Tax benefits for the employer | Coverage ends when the employment ends |
When and How Employers Can Opt for Group Term Life Insurance
Employers can seek exemption from EDLI and offer Group Term Life Insurance by fulfilling the following conditions :
- Comparable Benefits: The alternative group term insurance scheme must provide benefits equal to or better than EDLI.
- PF-Linked: The insurance scheme should be linked to the employee’s Provident Fund contributions.
- Approval: The employer must obtain approval for exemption from the Central Provident Fund Commissioner.
Steps to Introduce Group Health Insurance Scheme
Put up notice for the knowledge of the employees that you are going in for LIC’s Scheme in lieu of EDLI.
Apply to the Regional Provident Fund Commissioner under Sec.17 (2A) of the E.P.F. and M.P. Act 1952 to exempt you from EDLI Scheme. The application should be accompanied by the prescribed requirements including the Rules of the Proposed Group Insurance scheme. Central PF Commissioner has authorized the R.P.F.C. to grant exemption from the 1st of the month in which the application for relaxation is submitted. The Insurance company also offers necessary guidance to the employers for seeking relaxation.
Conclusion
EDLI provides a basic safety net for employees. However, employers can go above and beyond by opting for Group Term Life Insurance in lieu of EDLI. This decision offers the potential for enhanced coverage, customizable options, and additional financial protection for employees and their families. But most importantly, it takes care of your employees family when they truly need it.
What is the difference between EDLI and Group Term Life Insurance?
EDLI is a government-mandated scheme that offers a basic level of life insurance coverage to employees covered under the EPF scheme. It has a limited sum assured and no customization options. Group Term Life Insurance is a more comprehensive option offered by an insurance company. It provides higher sum assured, flexibility in coverage with add-on riders, and potential tax benefits for the employer.
Why would an employer choose Group Term Life Insurance over EDLI?
Employers may choose Group Term Life Insurance to offer their employees enhanced financial security with higher coverage and the ability to tailor the plan with additional benefits like accidental death or critical illness cover.
What are the additional costs involved for the employer with Group Term Life Insurance?
The employer is responsible for paying the premiums for Group Term Life Insurance, unlike EDLI, which is employer-funded. However, the potential tax benefits on premiums can offset some of the costs.
What factors should an employer consider when deciding between EDLI and Group Term Life Insurance?
Employers should evaluate factors like desired level of coverage, budget, employee needs, and administrative burden before making a decision. Consulting a qualified insurance professional can be helpful in navigating the options and choosing the most suitable plan for their employees.
If an employer has opted for Group Term Life Insurance and an employee is already covered under EDLI, does their coverage overlap or are they mutually exclusive?
In this scenario, the employee’s coverage would not overlap. Since the employer has opted out of EDLI and offers Group Term Life Insurance, the employee’s EDLI coverage will cease. They will only be covered under the employer-provided Group Term Life Insurance plan.
