Not many individuals know about various hidden facts on the Employees Provident Fund or EPF. In fact, there are many such facts and one of this is that your EPF gives you life insurance cover as well.
Of course, you do not get a large insurance cover, but, it is a cover nonetheless.
There is a mechanism to calculate the life insurance cover that you would get under EPF. The cover provided is as follows:
20 times the salary and the coverage for the monthly salary should not exceed Rs 6500. What this means is that if your salary is 6500 and more, you would get a coverage of 20 times the amount and for the purpose the maximum sum is Rs 6500 per month.
So, your life insurance cover would be 20 x 6500 = Rs 1,30,000.
Employers generally contribute 0.5 per cent of the monthly basic pay to the Employees Deposit Linked Insurance Scheme, which is why there is a life insurance cover linked to your EPF or Provident Fund Account.
Most employers prefer going in for a Group Insurance Cover for Employees, especially since it provides adequate insurance at lesser premiums. The life insurance cover under EPF is a good idea, but, the cap of Rs 1.3 lakhs is not a good proposition. In the unfortunate event of death of a earning member, the sum is just not good enough. What expenses would a family be able to meet with a sum of Rs 1.3 lakhs. Merely providing insurance for the sake of insurance is not a good idea.
Employers must take group insurance cover to provide adequate insurance to employees. All in all a good idea, but the sum is way too small.