Funny, I was just re-evaluating our own need for earthquake insurance, and I ended up deciding that, yes, we will keep it. (We've had it for a few years, but I re-evaluate everything every few years!)
Here was my thinking. We live in the greater LA area. A few years ago, I got CERT trained, and in that training, everyone emphasized that we are "10 months pregnant with The Big One." It's not a matter of if, but when, we have an earthquake greater than 7.0. Our annual premium is about $850, for $650,000 of coverage. That covers the house, the garage, personal property, and loss of use. The catch is that the deductible is 15%, or $97,500.
We kept it because earthquake insurance is for the kind of catastrophic damage that would make the house unsafe and uninhabitable. Of course, I don't have a good idea how likely THAT is, but the way I see it, saving and even investing that $850/year will never grow to a sum that would save us financially, in the event of catastrophic damage. With the insurance, we'd be able to rebuild. Without it, we could be financially ruined: on the hook for a mortgage on a house no one will buy, and we wouldn't be able to afford to repair. I know some people around here say, "Well, if it's that big of a disaster, FEMA will save us!" Maybe, maybe not. I'd rather not count on that "just" to save premium.