If more than one person has an insurable interest in the property coverage under a dwelling policy, what is true regarding the insurer's liability?

The correct answer highlights that in the case where multiple parties have an insurable interest in a property covered under a dwelling policy, the insurer is liable only for the interest of the named insured. This principle is grounded in insurance law, which holds that a policyholder is entitled to coverage for their financial stake in the property.

When a dwelling policy is issued, it specifically identifies the insured parties and outlines their interests. If there are additional parties with an insurable interest, such as co-owners or mortgage lenders, their interests may not automatically be covered under the same policy unless explicitly included. This means that if a loss occurs, the insurer will provide compensation reflecting only the financial interest of the named insured, rather than covering the combined value of all interests involved.

This principle helps maintain clarity in liability and ensures that the insurer's responsibility aligns precisely with the interests declared in the policy. If the insurer were liable for all interests, it could lead to complications, especially regarding the valuation of claims and potential disputes among interested parties.

In contrast, the other options suggest broader responsibilities or obligations for the insurer, which are not consistent with the standard practices in the insurance industry. Therefore, understanding the limits of an insurer's liability based on the named insured's interest is crucial