Business insurance

How you can use EPF funds to pay the insurance premium

How you can use EPF funds to pay insurance premiums | Photo credit: iStock images

Subscribers of the Organization of the Employee Provident Fund (EPFO) have the option of paying the insurance premium for the Life Insurance Company (LIC) policies managed by the government through their accounts Provident Fund of Employees (EPF).

In order to make LIC premium payments from EPF accounts, Form 14 must be submitted to EPFO ​​and at that time the subscriber’s EPF balance must be at least equal to two years in the amount of LIC premium. The facility can be used when purchasing an LIC policy or later by paying the LIC premium.

This allows the LIC and EPFO ​​to link the applicant’s policy and the EPF account, which allows the organization to withdraw an amount equal to the insurance premium and to surrender the LIC policy at the end of the term. premium. However, in order to be able to use the facility, the applicant must have been a member of EPFO ​​for at least 2 years.

The facility is especially beneficial for people facing financial hardship due to Covid or otherwise, as they can use their EPFO ​​money to pay the LIC insurance premium. It should be noted that the facility should only be used in the event of a financial crisis because it impacts the ability to bear interest on the funds in the EPFO ​​account. These funds are intended to save for retirement and are crucial.

The EPF is a pension scheme under which an employee contributes 12% of base salary to the fund and the employer contributes 8.33% to the Employees ‘Pension Plan and 3.67% to the employees’ EPF.

The government cut the EPF interest rate to a 7-year low of 8.5% in fiscal year 2019-20, which was 8.65% in fiscal year 2018-19 , 8.55% during the 2017-18 financial year and 8.65% for the 2016-17 financial year. EPFO has 6 crore of members who will likely see the EPF interest credit for the 2020-21 fiscal year anyway over the next week or so. They can check their funds in their provident accounts by making a missed call, by texting or through the UMANG app.