Which of the following correctly describes a principal difference between a dwelling policy and a homeowners policy?

A dwelling policy primarily covers the structure itself and designated other structures, personal property, fair rental value, and additional living expenses, but it does not include liability coverage. This is a fundamental distinction from a homeowners policy, which typically includes liability insurance as part of its coverage. Homeowners policies are designed to protect against a wider array of risks associated with property ownership and also provide liability protection to the policyholder.

The other options do not accurately convey the differences between the two types of policies. The homeowners policy is not limited to more expensive homes but is rather designed to cover owner-occupied residences. A dwelling policy can cover non-owner-occupied residences, which means that it does not require owner occupancy as a condition for coverage. Additionally, a dwelling policy can indeed cover multiple-family dwellings (up to four units), whereas homeowners policies are typically written for owner-occupied residences. Thus, understanding these nuances helps clarify the distinct intentions behind each type of policy.