Encryption which you are mentioning is Bitlocker encryption. That feature encrypts your device and makes it unusable if stolen. It prevents your device from being used even after a hard reset or recovery is done. Note that when you are selling your phone, encryption must be turned off. Data is protected and encrypted by Microsoft services, unavailable to others, and for an extra layer of security you can set up One Drive password, which than requires your pin each time the app is opened on your phone. For some extra security go to Settings>Accounts>Sign in options, and set up PIN which will be requested each time you try to unlock your device. To protect your SIM, go to Settings>Cellular&SIM>SIM settings and last option there is Security section where you can enable your PIN.
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