An insurer pays ₹50,000 if a phone is stolen within a year, and the chance of that is 0.01. What is the insurer's expected payout per phone?

Explanation

1. 01

   The payout is ₹50,000 with probability 0.01 and ₹0 otherwise.

2. 02

   $E = 50{,}000 \times 0.01 = 500$ rupees; a premium above this covers the risk.