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🌍 '''Earthquake insurance''' is a specialized form of [[Definition:Property insurance | property insurance]] that covers damage to buildings, contents, and sometimes additional living expenses resulting from seismic activity — a peril that standard [[Definition:Homeowners insurance | homeowners]] and [[Definition:Commercial property insurance | commercial property]] policies typically exclude. Because earthquake losses tend to be infrequent but potentially catastrophic, the coverage is usually written as a separate [[Definition:Insurance policy | policy]] or a [[Definition:Policy endorsement | buyback endorsement]], with its own [[Definition:Deductible | deductible]] — commonly expressed as a percentage of the insured value rather than a flat dollar amount. In the United States, the California Earthquake Authority (CEA) is the best-known provider for residential risks, operating as a publicly managed, privately funded entity that works through participating [[Definition:Insurance carrier | insurers]].

🏗️ Pricing earthquake coverage demands heavy reliance on [[Definition:Catastrophe model | catastrophe models]] that simulate thousands of hypothetical seismic events against detailed exposure data — including a building's location relative to fault lines, its construction type, age, soil conditions, and foundation design. [[Definition:Underwriting | Underwriters]] use these model outputs to estimate [[Definition:Probable maximum loss (PML) | probable maximum loss]] and set [[Definition:Premium | premiums]] that reflect the tail risk involved. On the supply side, [[Definition:Reinsurance | reinsurance]] and [[Definition:Insurance-linked security (ILS) | insurance-linked securities]] such as [[Definition:Catastrophe bond | catastrophe bonds]] play an outsized role in supporting earthquake capacity, because the concentrated, high-severity nature of seismic risk makes it difficult for any single carrier to retain on its own balance sheet.

⚠️ Despite the potentially devastating financial impact of a major quake, earthquake insurance penetration remains stubbornly low in many high-risk regions — including parts of California, the Pacific Northwest, and the New Madrid Seismic Zone in the central US. Affordability is a persistent barrier: percentage deductibles mean policyholders bear a significant first-dollar burden, and premiums can be steep for older, unreinforced structures. Public policy efforts, including tax incentives and mitigation credits for [[Definition:Retrofit | retrofitting]], aim to close the protection gap. For [[Definition:Insurtech | insurtech]] firms, parametric earthquake products — which pay out based on measured ground shaking intensity rather than assessed damage — represent an emerging avenue to expand coverage to underserved populations.

'''Related concepts'''
{{Div col|colwidth=20em}}
* [[Definition:Catastrophe model]]
* [[Definition:Catastrophe bond]]
* [[Definition:Probable maximum loss (PML)]]
* [[Definition:Property insurance]]
* [[Definition:Parametric insurance]]
* [[Definition:Protection gap]]
{{Div col end}}

Definition:Earthquake insurance - Revision history

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