Why are flood and earthquake typically excluded from standard homeowners and many property policies?

Standard homeowners and many property policies exclude flood and earthquake because these perils are catastrophic and geographically concentrated — when they occur, they cause enormous losses across many properties at once, which is difficult to insure with ordinary premiums and the law of large numbers. Instead, flood coverage is typically obtained separately (for example, through the National Flood Insurance Program or private flood insurers), and earthquake coverage through a separate policy or endorsement. Insureds in at-risk areas must arrange this additional coverage. Understanding why catastrophic perils like flood and earthquake are excluded — and covered separately — is standard exam content.