I am looking at a few single family homes in SW Indiana and Earthquake insurance is quite a bit more than I expected. 

I'm looking at a state without snow, earthquakes, hurricanes, tornadoes or floods that doesn't have high property taxes, any income taxes and is LL-friendly. 

@Will Dixon     Could it be the earthquakes recently? 

We've been living out of the country for almost a decade (Haiti, doing nonprofit work).

Well, part is the brick-on-brick construction, the other part is your risk of an earthquake.  

There is more, not water damage but earthquake.

I'm a little unclear on the question.An HOA should have an insurance policy package that covers the general building, common areas, general liability, directors & officers coverage, worker's comp, and a mix of other things like non-hired auto and perhaps region specific things like flood or earthquake coverage. 

Just like if there is an earthquake in San Diego. 

They seem to be more common in California since the ground is harder and a little 3.5 earthquake can cause a crack.Plus, he tells me that it can be good because it scares off a lot of other investors.In fact, I had to repair a crack in my house's foundation over the summer and it cost around $12K.

However, you aren't selling because of the recession, you would sell because the original reason for your investment didn't pan out. 89 to 92  in the SF bay area was a brutal market that most investors on BP are too young to have experienced.. but you had some serious retreat in prices.. this happened not only because of over heated market.. but the earthquake and the war.. it was not uncommon to see 50% devaluation on HIGH end homes.. from Marin county all the way down to Los Gatos etc..