Impact of Micro-Insurance Vulnerability on Low Income Families: A Case Study of Varanasi District

Evidence on the impact of micro-insurance on vulnerability of the poor to natural hazards in developing countries is needed for micro-insurance development and investment purposes. This paper attempts to provide impact of micro-insurance on vulnerability of low income household in Varanasi District. It presents impact of various types of natural risk on the rural respondents. The paper argues that micro-insurance so far has been somewhat supply-driven rather than driven by effective demand, especially from the poorest, and thus the insurance products which would benefit the poorest are still at a limited stage of development. Institutional innovations and new insurance products therefore deserve promotion. Data are collected from 300 households in Varanasi district of U.P. of India. Results show that the insurance indeed decreases vulnerability and reduces the chance that households fall into the poverty trap. These findings show that a competitive micro-insurance product can significantly contribute to the reduction of vulnerability of the poor, as well as this paper provides guidance about impact of micro-insurance on low income household in rural are of Varanasi District.