All of the following statements about coinsurance are true EXCEPT:

The statement regarding the coinsurance formula being applied to total losses is not accurate. In the context of property insurance, coinsurance typically pertains to partial losses, rather than total losses. If a total loss occurs, the insurer is usually obligated to pay the full policy limit, assuming all conditions of the policy are met and that coverage is in place. Coinsurance is designed to encourage policyholders to insure their property at a specific percentage of its value, thereby ensuring that they are not underinsured, which can lead to a reduction in claims payout if the coverage is inadequate.

On the other hand, the other statements reflect the principles of coinsurance accurately. The requirement for the insured to maintain coverage at a certain percentage of the property's value is a key characteristic of coinsurance, as is the concept that inadequate insurance can lead to a loss not being fully covered. Additionally, coinsurance aids in ensuring fairness in insurance rates by promoting adequate coverage among policyholders.