With AWS it's extremely easy to keep an up-to-date database backup in a different region.
And it's great that you haven't personally encountered disaster, but of course once again that's cherry-picking. And it's not just a component overheating, it's the whole closet on fire, it's a broken ceiling sprinkler system going off, it's a hurricane, it's whatever.
For the rest, there’s insurance. Most calculations done in a research setting are dependent upon that research surviving. If there’s a fire and the whole building goes down, those calculations are probably worthless now too.
Hell, most companies probably can’t survive their own building/factory burning down.
It is just as extremely easy on Hetzner or on premises
For home gamers like myself, it's has become a no brainer with advances in tunneling, docker, and cheap prices on Ebay.
When your own hardware rack goes down. You know the problem, how much it costs to fix it, and when it will come back up; usually within a few hours (or minutes) of it going down.
Do things catch fire, yes. But I think you’re over-estimating how often. In my entire life, I’ve had a single SATA connector catch fire and it just melted plastic before going out.