Let me restate that, because earthquakes aren't covered except under separately available policies. Lenders do not mandate earthquake coverage, although they do mandate general homeowner's insurance, in nearly every case. So, your concern is not unfounded, but well founded.
I don't have figures for the percentage of California real estate not covered by earthquake insurance; I suspect it's substantial. The coverage is pricey and some look at the cost/benefit analysis and think, "Yeah, I might need it, but probably I won't, so why spend the money? Besides, if things are so bad that my house is gone, I'll likely have bigger problems than worrying about how to fund rebuilding; things like medical care and/or funeral arrangements." Now, if you're buying a $700,000 house, I think you're less likely to think that way than if you only owe $100,000 on a property with a current market value of $500,000. If you're in the latter situation, you could likely bulldoze your house and sell the naked dirt for $100,000 more than you currently owe. So, if a big quake bulldozes it for you, the land value would be sufficient to provide most or all of the collateral for the loan you'd need to clear the lot and rebuild.
Contrary to popular belief most Californians are just like people in the rest of the country. They just want to work, play, raise their families and if possible, own a home. A two bedroom, one bath 50 year old starter home in my town is 300k if you're lucky enough to find one. Add to that the state taxes and high home owners, most young couples or retired people who would be living in those homes have no money left for the high cost of earthquake insurance.
So move to a different location? Leave our jobs, our families, our life and move where?