Which of the following statements regarding coinsurance is NOT true?

The statement indicating that the coinsurance formula will apply to total losses is not true. Coinsurance is a provision in property insurance policies that encourages policyholders to maintain a certain level of coverage in relation to the actual value of the property being insured. It mainly applies to partial losses rather than total losses.

When a total loss occurs, the insurance company typically pays the full amount of the loss up to the policy limit, without applying the coinsurance formula. This is because a total loss means the insured property is completely destroyed, rendering the coinsurance calculation, which is based on the relationships between the insured value and the actual value of the property, irrelevant.

In contrast, coinsurance is relevant in cases of partial losses, where it incentivizes the homeowner to insure their property for an adequate amount in relation to its total value. This prevents underinsurance and helps ensure that claims will be handled fairly when coverage is sufficient.

Thus, while statements about how coinsurance applies to partial losses and helps ensure adequate coverage are accurate, the premise that the formula applies in cases of total losses does not hold true and is therefore the correct answer in this context.