If the physical drive fails, then you're right - the data on both the C: and D: drives may be lost.
However it's rare for a new drive to simply fail, especially if it's a brand new SSD. Issues that might require reformatting are normally limited to a single logical drive, so any other logical drives on the same physical device would remain unaffected.
Another reason is that if you ever need to reinstall Windows, it's
much simpler if your personal info is on another drive so there's no risk of losing any of it.
Doing this lets the C: drive be dedicated for the just the OS, which also makes it easier to make system image backups and restore them if anything (ahem, like a showstopping bug in an important app update) might suddenly appear.
If that happened, you could simply restore the most recent system image and not worry about whether you'd separately backup up all your personal files so they wouldn't be overwritten with older versions.
I've learned several painful lessons regarding what I did and didn't back up since Win3.1. This is how I now configure all my computers now and it's saved me more times than I can count!๐