"I do have an iCloud backup." My understanding is that iCloud can be a complete backup solution for an iPhone, but for a Mac, it only includes the files that you specify, typically from the Desktop or Documents folder. It might include Apple Mail if you configured it for that. But unlike with the iPhone, it will not restore your device completely to the state it was in when last backed up. Time Machine can do that. If you only have an iCloud backup, I suggest using another computer to log into your iCloud account and look to see what has been backed up there. I would do this before erasing your Mac disk. If your backup is not really sufficient, then I would find either an Apple Store (some are open again now) or an authorized Apple service provider (there are definitely some open, at least there are in my area) to see if they can get your disk back long enough to make a complete Time Machine backup or a "clone" type backup (using a tool like CCC, SuperDuper, DriveDX, etc.). A complete backup using a SSD external drive will take under 30 minutes.
For personal use, I do not use encryption, because of what can happen like you are experiencing. I also make sure my computer is in a secure location. I don't leave it in hotel rooms (unless there is a locking safe), which sometimes means I have to awkwardly carry it around. You can also be careful with good passwords and the like. I have multiple Time Machine backups plus one clone backup of that computer. My work laptop has encryption, that's mandatory by my employer. I have three different Time Machine backups and one clone backup of that work computer, because with encryption, if the wrong bit or two fails or flips, the entire disk can become unusable. Possibly what you are experiencing. So I would recommend: (1) no encryption, but take extra steps to keep things secure and make multiple backups; or (2) use encryption, but make multiple backups of your entire system regularly (backup disks can and do fail as well).
