The on going National Agricultural Insurance Scheme is a good step far ward to insure risk of millions of farmers whose livelihood depends on the pattern and distribution of monsoon rain in India. However, it suffers from some of the major problems inherent in crop insurance programs throughout the world. With this background the paper reviewed the innovative techniques in agricultural/rural insurance, which overcome some of the disadvantages of yield based group insurance and suggests rainfall (weather) index insurance as a better alternative/complement to the existing agricultural insurance scheme. The weather (rainfall) index based insurance is also more compatible with reinsurance practices world wide, which make primary insurers to cover their local/regional risks by reinsuring them selves with international reinsu