Which of the following reflects a major function of coinsurance in insurance policies?

The correct choice emphasizes that one of the major functions of coinsurance in insurance policies is to encourage accurate property valuation. Coinsurance is a provision that requires policyholders to insure their property for a certain percentage of its total value—often 80%, 90%, or 100%. If the insured value of the property is less than the required coinsurance percentage, any claims made may be reduced based on how underinsured the property is relative to its actual value.

This mechanism promotes an accurate assessment of property value because policyholders have a financial incentive to insure their property properly. If they underestimate its value, they risk receiving a reduced payout during a claim due to not meeting the coinsurance requirement. By reinforcing the significance of maintaining an appropriate level of insurance coverage relative to actual value, coinsurance helps ensure that both insurers and policyholders are committed to an accurate understanding of property worth, which minimizes underwriting risks for insurers.

Other options do not accurately reflect core roles of coinsurance. Eliminating premium costs, preventing fraudulent claims, and increasing policy coverage thresholds do not describe functions directly related to coinsurance, making them less relevant in this context. Coinsurance primarily serves as a tool for maintaining equitable insurance practices and accurate property valuation rather than directly addressing these other aspects of