Earthquake insurance is a type of real estate property insurance which pays the policy holder in the event of an earthquake that might cause damages to the property. Ordinary home owners' insurance policies do not usually cover damages caused by earthquakes.

Most earthquake insurance policies come with a high deductible, which makes this type of insurance useful only if the entire home is destroyed, and is not useful if the home has only suffered minor damages. The policy rates depend on location and the risk of an earthquakes occurrence in this locality. The rates may however be cheaper for homes made of wood, which can with stand earthquakes as compared to those made of brick and concrete.

As is the case with insurance cover offered to protect from natural calamities like flood insurance or insurance on damage from a hurricane or other large scale disasters, one thing these insurance providers need to be careful about assigning this type of insurance, is the possibility of large liabilities this can give rise to, for instance, an earthquake strong enough to destroy one home will also probably destroy dozens of homes in the same area. Hence, if one company has written insurance policies on a large number of homes in a particular location, then a devastating earthquake will drain out all the company's resources all at once. Insurance companies therefore tend to devote a lot of study and effort toward risk management to avoid such situations.

California

Earthquake insurance has come to be a political issue in California, whose residents generally purchase more earthquake insurance than residents of any other state in the United States of America. After the 1994 Northridge earthquake, almost all insurance companies completely stopped providing home owners' insurance policies in the state, because under California law which is termed the 'mandatory offer law', companies offering home insurance must also necessarily offer earthquake insurance.

Eventually the legislature created the provision for a 'mini policy' that could be sold by any insurance provider in order to comply with the mandatory offer law under which only structural damage would be covered, that too with a 15% deductible. Any claims on personal property losses and loss of use are hence limited. The legislature also created a quasi-public agency which is privately funded and publicly managed, called the CEA, short for California Earthquake Authority. Membership in the CEA for insurance providers is voluntary and member companies choose to satisfy the mandatory offer law by selling the CEA mini policy.

The premiums are paid to the insurer, and then placed in a 'pool' in the CEA in order to cover claims from homeowners with a CEA policy from other member insurers. The state of California explicitly states that it does not back up CEA earthquake insurance, in the event that claims from a major earthquake would drain all CEA funds. It will also not cover claims from non-CEA insurers in case they were to become insolvent as a result of earthquake losses.