correct ?. does it serve any other purposed if my wallet is lost or stolen ?
It serves as another security layer against physical manipulations of Trezor hardware wallet. The link Rath_ shared describes an unfixable bug in the design of Trezor devices. The bug allows an attacker (who knows what he is doing) to extract the seed phrase from a Trezor if he has physical access to it. A strong passphrase or an SD card that stores a secret code are two ways that vulnerability got solved.