A multinational corporation loses 300 laptops annually and these laptops are valued at $850; would they take out an insurance policy to cover the costs of replacement if the insurance premiums were $21,250 monthly?
The answer is no, because the cost of replacing them is the same as the cost of the insurance, they would take a risk on not losing 300 laptops next year.
The calculations are as follows:
- ALE: SLE x ARO
- ALE: $850 x 300 = $225,000
- Monthly cost: $225,000 / 12 = $21,250