How to backup

So I just need to backup the iCloud library that I find in the Photos directory?

Exactly. Back up the Photos Library.photoslibrary. By default it will be in the folder "Pictures" in your home folder. The name of the "Pictures" folder may be different, depending on the primary system language of your Mac. In some languages it is called "Fotos" or "Imagines" or "Bilder" or similar.

You may want to look at the Photos Help as well: Back up the Photos library on Mac - Apple Support

. I am wondering what is the best way to keep a backup of the library, should something happen.

That will depend on your Photos > Preferences > iCloud.

• If you did not enable "Optimize Storage" for your Photos > Preferences > iCloud, all original image files will be stored locally on your Mac, and you can back up your Photos Library like before. Copy it to an external drive formatted MacOS Extended (Journaled) or include it in into your regular Time Machine backups for your Mac.
• If you are now using "Optimize Storage" and not all original photos are included in your local Photos Library, back the Photos Library up just like described above, but you need to make additional copies of the original image files. Select all photos and videos in Photos and use "File > Export > Export unmodified originals" to write the original image files to a backup drive. Since the originals do not change, you only need to do that once. And whenever you import new photos save the new originals as well, as sonn as you import them to Photos.