Storing contacts on the SIM card is an old holdover from the days when the only user-accessible storage
was the SIM card. We haven't had that situation since the first iPhone, so Google never removed it from Android until recently.
If the only place you have your contacts is your SIM card (they don't back up if that's where they are), and the SIM card goes bad, you lose all your contacts. (And the SIM card size is limited. Some people, believe it or not, have a few thousand contacts - all that data will not fit on any SIM card.) If your contacts are internal, as google contacts, they're backed up to the cloud. and if the SIM card goes bad (and they do), it's just a matter of going down to the carrier's store (or contacting the MVNO - depending on whether you use a carrier or an MVNO) and you'll get a new card. But if your contacts were on the bad card, they can't transfer them to the new card.
You can import/export from internal storage, but if you entered them as Google contacts, they're already at
Google Contacts, so putting a new phone on that Google account will sync the contacts to it. And you can import/export more formats at the site than you can from the phone.