> All my data is backed up to cloud

How is that less worrisome? Your data is living in someone else's storage, waiting to be compromised.

Depending on the backup mechanism they use it might be protected with cryptography and a private key or strong password.

Assuming they did all that properly of course....

My phone is not backed up. There's also nothing on it that I could not stand to lose.

There are also stories of people losing all of their stuff by sending the device in. So the added benefit of suggesting a wipe is that it encourages you to assume total loss and plan ahead.

That doesn’t necessarily help with people sending in devices with special nostalgia for the physical hardware, such as a signature. Though whether those sorts of issues were from not paying attention to notes attached to the account or outright theft has rarely been clear.