It's one of several things that could happen (fire, flood, burglary, other natural disasters depending on where you live etc., lots of ways to lose all data at a location).

But yes, I mean it literally. Insurance may pay to replace your house. But a portfolio of a few years of work, the text of your half-finished novel, photographs of your children growing up, the final e-mails you exchanged with your uncle who died of cancer? No insurance money will ever replace those.