I suppose it's OK for some use cases but realistically it doesn't provide a whole lot of security.

Doing this only really protects you if someone steals the physical disks from inside AWS, whilst this is a legitimate risk it seems incredibly unlikely and i'm not aware of any such instance.

HOWEVER, it does not protect you from the far more likely scenario of someone gaining access to your AWS account. If someone is able to get your credentials (or otherwise hack your account) then all your data is vulnerable.