Im assuming you're projecting here, my entire life does not indeed hinge on whether or not my phone is backed up to the cloud. I managed to make it for 3 weeks or so without it and it was quite refreshing.
In terms of backup, my free iCloud backup was full. So as of late, my photos, voice memos and voicemails weren't synced. Other than that everything else was backed up. On that note, I refuse to pay for the cloud when I really don't need it. I back up my photos on an external hard drive every few years. It just so happened that I didn't back it up before it took water damage. (yet apple claims water resistance up to 3 meters for 30 mins 🐂💩)
In my case the phone functioned as normal besides the screen. I could charge it, it would ring and i could make calls through other devices. However when I reset it, i was unable to enter my passcode afterwards and lost all of those functions besides receiving calls. Face ID was shot as well.
It's a simple precautionary measure I think that Apple overlooks but could be very beneficial and welcomed by the Apple community. Especially with 2 factor login as a norm now days all "texted" login codes were out the window until I got a loaner iPhone just yesterday.
Again a simple "screen mirror" option from the desired display device would be welcomed. In my case my iPad or mbp would have solved any issues but unfortunately you can only initiate a screen share from the projecting device not the receiving one. It does seem with this passcode feature that Apple is looking to expand on ways users can get back into their devices after user errors. My qualm may fall on deaf ears but you heard it here first lol