You still need to do external backups. You may have a lot of trust in the provider and these less frequently, but you should still do them.
 Had this happen to me once in the early 2000's: company I worked for had a dedicated server at a colo facility. After several days of them not responding to phone/email/etc, their answering machine was changed to a message saying the SEC had seized all assets and had all the owners 'under investigation' or something like that. We had external backups, but immediately took the latest stuff and got everything migrated to a new system in a new facility. Server stayed up for a few weeks after that, but then suddenly their whole IP space went offline. We never did get our server back.
Other than the cost, I recommend it for people who can afford it. Wonderful service that I was happy with for a long time.