Kerala approves Rs 10 lakh disaster insurance for homes: Check details

The state pivots from ad hoc relief to a dual-trigger insurance model to secure fiscal stability and provide ₹10 lakh coverage for vulnerable households.

Kerala’s cabinet has approved a comprehensive group insurance scheme for houses damaged in natural disasters, seeking to have a long-term risk management solution rather than a one-off relief measure.

 

Each house will be insured for Rs 10 lakh under the scheme that is estimated to cost around Rs 120.75 crore annually, news agency PTI reported. A cabinet meeting chaired by Chief Minister Pinarayi Vijayan agreed to implement the scheme through the State Insurance Department.

 

Why the state is turning to insurance

 

Kerala has faced repeated extreme weather events in recent years, including floods, landslides and heavy rains. It has had to spend substantial sums annually on rescue, relief, rehabilitation and reconstruction, PTI said citing a press statement from the Chief Minister’s Office.

 

 

The recurring expenditure has put pressure on the state’s finances. To explore alternatives, the government had earlier appointed a committee led by Planning Board member Ravi Raman to examine a suitable risk transfer framework. Based on its recommendations, and further studies by the Rebuild Kerala Initiative, the Cabinet has now given in-principle approval to a group insurance model.

 

Two-part insurance model

 

The proposed structure combines parametric insurance and indemnity insurance.

 

1. Parametric insurance (for the state):

Under this component, the state will receive payouts if predefined disaster indicators — such as rainfall levels, flooding intensity or wind speed — cross specified thresholds in a particular area.

 

• No individual house-level damage assessment will be required.
• Funds can be released quickly for relief and rehabilitation.
• The cover amount will be linked to the average annual disaster relief spending over the past decade.
• The policy is proposed for a five-year term.
• This approach is designed to ensure faster liquidity for the government when disasters strike.

 

2. Indemnity insurance (for BPL households):

 

The second component will provide direct compensation to house owners from below-poverty-line (BPL) families in affected areas.

 

• Cover of up to Rs 10 lakh per house.
• Includes damage to the structure, household goods, and rental support until repairs are completed.
• Compensation will be credited directly to beneficiaries after verification.

 

What it means for households and public finances

For the state government, the model seeks to shift a part of disaster risk to insurers, thereby reducing unpredictable budgetary strain.

 

For vulnerable households, particularly BPL families, the indemnity component could offer a more predictable and structured compensation mechanism compared to ad hoc relief.

 

As climate-linked disasters become frequent, Kerala’s move signals a shift towards formal risk financing tools in public policy — a development that may be closely watched by other disaster-prone states.