Cloud providers typically manage multi-tenant infrastructure, where physical hardware is shared among customers. Therefore, drives are not destroyed for each customer unless explicitly required in the contract. If the customer's agreement specifies dedicated hardware disposal, then the provider must comply by physically destroying the drives.
Cryptographic erasure and degaussing are valid sanitization methods, but they may not meet the specific contractual requirement of physical destruction. Insurance clauses are unrelated to disposal.
This question underscores the importance of negotiating contractual terms in cloud agreements. Customers handling highly sensitive or regulated data may require physical destruction, while others may accept logical erasure. Clear agreements ensure both compliance and alignment of security responsibilities.