This article presents the factors that help build the adaptive capacity of individuals to reduce vulnerability from natural threats. The findings are based on primary data on individuals engaged in various livelihood practices in the Digha-Sankarpur- Mandarmoni region along the eastern coastline of the Bay of Bengal in India. Coastal communities have their individual perceptions about their vulnerability to natural threats and associated risks to various assets. Based on perception survey responses, “adaptive capacity” is measured and the determining factors are analyzed with an aim to provide policy guidelines for strengthening the adaptive capacity of people dependent on coastal ecosystem-based livelihoods. Findings show that income security for individuals in coastal systems can be achieved through a livelihood diversification strategy. The scope for individuals to build personal savings, have access to financial institutions, and engage in collaborative actions with immediate neighbors in the community help to prevent multiple losses at the individual level aids in their adaptive capacity. Government actions to provide institutional and governance support and incentives to promote livelihood diversification and personal savings would enhance adaptive capacity through institutional actions. Public investment in public goods and services, including protection and monitoring of natural coastal ecosystems, infrastructure development, technological intervention, providing access to information, and community empowerment, have important roles to play in enhancing adaptive capacity.