Premiums for builder's risk insurance are based on what factor?

The correct choice is based on the "maximum value at risk" because builder's risk insurance is specifically designed to protect against loss or damage to materials, fixtures, and equipment during the construction or renovation of a building. This type of insurance policy reflects the maximum exposure that an insurer would face if a total loss occurred.

When determining premiums, insurers need to evaluate the highest potential value that could be at stake, which is why they assess the maximum value at risk. This figure helps insurers to gauge the overall financial exposure over the duration of the construction project and to calculate premiums that accurately represent that level of risk.

Other options might suggest other factors important in assessing property insurance, but they do not align with the specific rationale for builder's risk insurance premiums. For instance, considering actual value might not fully capture the risks involved during construction. Projected future value is speculative and not a reliable basis for determining the cost of insurance during the building phase, while insured construction costs often represent only a portion of the risk rather than the highest value exposed. Therefore, the basis on which premiums for builder's risk insurance are calculated is indeed the maximum value at risk, ensuring comprehensive coverage during the completion of the construction.