Which of the following statements concerning coinsurance is NOT true?

In the context of insurance, coinsurance is an arrangement that requires the insured to maintain a specified level of coverage in relation to the value of the property insured. This concept is typically applied within property insurance policies to encourage policyholders to insure their properties to a value close to their actual value to avoid penalties for underinsurance.

The statement asserting that coinsurance affects total losses tends to imply that the coinsurance requirement does not play a role in determining the amount of the claim paid by the insurer in the event of a loss. However, this is incorrect. Coinsurance requirements indeed have a significant impact on the amount of claim payment for losses. If a property is underinsured based on the coinsurance percentage, the insurer will reduce the claim payment in proportion to the degree of underinsurance, thus affecting total losses expressly.

Thus, the principle of coinsurance serves multiple important functions: it enforces that the insured maintains an appropriate level of coverage (which relates to the first statement); it can lead to a penalty if the insured does not meet this level, resulting in a claim reduction; and it motivates property owners to evaluate and maintain proper insurance values for their properties accurately. Each of these aspects demonstrates how the concept integrates into the broader framework of risk management in insurance