You still owe the money on the mortgage even if the asset is gone. For example, if you get into a car crash and total your car the day after buying it and taking out a loan, the car loan folks still want their money back. Losing the asset such as through an earthquake just means the mortgage is no longer secured by the asset. If you walk away, the bank will try to recoup their money from your investments instead.
Your earthquake insurance should be sufficient to cover debris removal, any necessary permitting/planning, and rebuilding. (If a special assessment is required, it's probably insufficient.) Check whether it covers your unit (studs in) or just the outside building. If the master insurance just covers the building itself, you'll want to consider insurance for your unit replacement.
In deciding whether you need additional insurance, consider whether you want to deal with the following scenario:
No home (lost in earthquake)
Bank demanding you continue mortgage payments
Special assessments by the condo association