Pissed off months ago I called them on it because I was considering some VC games, but was told if I had to format or ever mail it in and get a replacement I'd lose all my stuff.
They said if recoverable they'll recoup your saves if it goes in, but all downloads are already stored in an account they keep for you and you're free to download them all again as much as you want as it was paid for. The only real losses is saved games and things you may not be able to stuff to a SD card before hand.