Is the iCloud storage safe, if the internal hard drive were to be corrupted?

Corin, just remember that iCloud is a syncing service and not a backup. Cloud is saving the current state of the data on your Mac. Whatever happens to your documents and data on your Mac will sync to iCloud. A drive does not necessarily fail instantly, out of the blue. There may be long periods where documents might get damaged by transmission errors or bad disk blocks, while the drive is gradually failing, and the damage might sync to iCloud. You need to have an additional backup that will archive older versions of your documents and data, so you can go back intime to recover older versions.

Probably safe. I would always advise you to make external backups via Time Machine to an external SSD (or HDD if > 2TB for cost reasons). Formatting the hard drive will not affect your iCloud data (yes, this is proved due to my experiences with this). Apple is not that short sighted! You will only lose your data if you go and specifically delete your files from Finder, resetting your Mac etc. will not remove the data.

In my past experiences, the Time Machine backup downloaded all of the files in iCloud Drive to transfer to the Time Machine backup…