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What is the Employees' State Insurance Scheme (ESIC)?

What is the Employees' State Insurance Scheme (ESIC)?
June 20, 2023

In this policy, the investment risks in the investment portfolio is borne by the policyholder

While there are several insurance policies available to the public today, there are some saving schemes in India that not many are aware of. Did you know about the Employees’ State Insurance Scheme that falls under the Employee State Insurance Act that was laid down in 1948?

This is a social security scheme that’s particularly helpful for the underprivileged and working class who don't have financial stability. For instance, if someone loses their job, they won’t go without basic necessities until they find another option. In most cases, employment, health, retirement, childcare benefits and many other things are covered under social security schemes.

A little more about ESIC

ESIC can be referred to as a self-funded healthcare scheme where members contribute to build their corpus. The biggest advantage is that the members of this scheme can avail subsidised medical facilities at ESI network hospitals.

Some of the benefits extended by ESIC include medical care, sickness benefit, maternity benefit, disability benefit, dependents benefit, and funeral and confinement expenses. It works well for those families who otherwise find themselves at the precipice of financial insecurity.

Eligibility for ESI

Those who are employees in organisations that are established under the Factory Act and Shops and Establishments Act are covered under this scheme. They must not get an income above Rs 21,000. Also, the employer they work for must have at least 10 or more employees as part of the payroll.

What are the features of ESI?

ESI is a beneficial scheme that offers several features:

  • It covers the employed individual as well as their entire family’s medical and emergency needs, right from the time the membership begins.
  • The scheme also offers medical coverage for specified critical illnesses with cash benefits. In case an employee has clocked 78 days for six months, the scheme will take care of 70% of the wages for up to 91 days.
  • As part of ESI, those who are eligible for maternity leave can avail the benefit for 26 weeks, with an option of the term being extendable by a month. During this time, the employee receives 100% of the wages for contributions up to 70 days in this period.
  • In case someone loses their job but is covered under this scheme, they need not worry because the unemployment benefit extends up to three years. The benefit is initiated once the member gives all the information about their last job, retrenchment and proof of permanent invalidity. This scheme also has a provision for employees to receive 50% of their last wages for up to two years.

Benefits of ESI

  • Unemployment benefit can only be availed by a member, if they have been a part of the scheme for at least two years. This is generally applicable in cases of those who have lost their job due to factory closure, retrenchment or permanent invalidity. As part of this benefit, the members receive medical aid for themselves or their family for the period. Their expenses related to vocational training is also covered.
  • As the name suggests, the medical care benefit is extended to the members as well as their dependents from the very start of the membership. Those who are retired and permanently disabled as well as their spouses are eligible for this for a nominal premium of Rs 120 per annum.
  • The sickness benefit can only be availed if a member has contributed for at least 78 days during a six-month period. As part of this benefit, members are provided 70% of the wages for the sickness period. It is important to note that the maximum sickness period is capped at 91 days.
  • Critical and long-term diseases are covered under Extended Sickness Benefit (ESB), wherein 80% of the wages are provided for up to two years after contributing 91 days during a six-month period. There’s also an Enhanced Sickness Benefit, where the full wages are payable to a member undergoing procedures associated with family planning.
  • Disability benefit is available in case of temporary disability or permanent disability.
  • Lastly, there’s the Funeral and Confinement Benefit, where dependents will receive Rs 15,000 upon the untimely death of a member.

ESI registration process

  1. Head to the ESIC portal and sign up as a new user.
  2. Add all the required details including employer name, state, email id, etc.
  3. Select the option to confirm your employer’s labour contract.
  4. Submit the form to receive login credentials.
  5. Visit the ESIC portal to log in.
  6. Key in the username and password received on your email to log in.
  7. Select ‘New Employer Registration’, choose the type of unit, and submit.
  8. As you get to the next page, add the required details of the unit.
  9. You also have to provide details on the nature of business, category, PAN etc.
  10. Add the date of commencement of the establishment and licence details.
  11. Next, add the ownership details that are required.
  12. Add the total number of employees in your establishment and also the number of employees Rs 21,000.
  13. Enter other details and click on the employee declaration form.
  14. Provide the IP number and date of joining.
  15. Enter the name of the IP and other details.
  16. Submit and close the new page after adding in all the details.
  17. Select the nearest ESI branch and inspection division.
  18. Choose the declaration checkbox and submit.
  19. On the new page, pay the first contribution and click submit. You will receive a Challan number.
  20. Head to the required payment gateway and complete your payment, after which you will receive an ESI registration letter in your email.

What if you are no longer eligible for ESI?

It’s quite possible that you started out with your monthly wages at Rs 21,000 or lower, making you eligible for ESI. Over the years, you may have grown in your career, which then doesn’t make you eligible for benefits provided by ESI.

In such cases, you have to find alternatives so that you have adequate risk coverage in case something untoward happens. This is possible by choosing certain life insurance policies.

  • Term life insurance

    This plan safeguards you and your family by providing financial protection in case the policyholder dies during the tenure of the policy. The nominees will receive a death benefit to ensure they can meet their financial needs, without having to compromise on their lifestyle.

  • Guaranteed savings plan

    This type of plan caters to those who are looking for regular payouts to fulfil future expenses related to certain milestones. Guaranteed savings plan work well if you are looking for wealth creation, while ensuring you get guaranteed returns.

  • Unit Linked Insurance Plans

    This type of plan brings together both equity and debt returns, so that you do not just get higher returns through equity but you also have the safety of debt.

    If these do not work for you, you could also invest in a PPF plan to inculcate the habit of financial discipline. These plans not only help you in wealth creation but also help save tax.

Related Article

ARN - ED/06/23/2488

The Unit Linked Insurance products do not offer any liquidity during the first five years of the contract. The policyholders will not be able to surrender or withdraw the monies invested in Unit Linked Insurance Products completely or partially till the end of fifth year.

Unit Linked Life Insurance products are different from the traditional insurance products and are subject to the risk factors. The premium paid in Unit Linked Life Insurance policies are subject to investment risks associated with capital markets and the NAVs of the units may go up or down based on the performance of fund and factors influencing the capital market and the insured is responsible for his/her decisions. HDFC Life Insurance Company Limited is only the name of the Insurance Company, The name of the company, name of the contract does not in any way indicate the quality of the contract, its future prospects or returns. Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document of the insurer. The various funds offered under this contract are the names of the funds and do not in any way indicate the quality of these plans, their future prospects and returns.