Which statement about coinsurance is NOT true?

The statement that the coinsurance formula applies only during partial losses is not true. Coinsurance is a provision commonly found in property insurance policies that requires the insured to carry a minimum amount of insurance relative to the property's value. This ensures that the insured has a financial interest in fully protecting the value of the asset.

The coinsurance requirement is relevant not just during partial losses but also plays a crucial role in determining how a loss is calculated when a total loss occurs. If the insured has not maintained the required level of coverage, they may suffer a penalty in the event of a loss, impacting both partial and total claims.

Particularly, if a total loss occurs and the insurance carried is below the coinsurance requirement, the insurer may adjust the payout according to the proportion of the coverage taken out compared to the required coverage. This highlights the importance of maintaining adequate insurance coverage at all times, rather than only during partial loss events.

This principle of coinsurance assures that the insured has a financial stake in the property being adequately insured, thus discouraging underinsurance and fair premium calculations based on true risk exposure.