Which option describes how a coinsurance penalty is calculated?

The calculation of a coinsurance penalty primarily involves the relationship between the actual coverage amount and the coinsurance requirement. When an insured property is underinsured, insurers apply a coinsurance penalty to determine the payout during a claim.

In this context, the coinsurance requirement is a predetermined percentage of the property's actual value that the insured must meet. When the actual coverage is less than this requirement, the insurer will calculate the penalty using the actual coverage divided by the coinsurance requirement. This means that if a policyholder has not insured the property to the required level, the insurer will calculate the claim payout proportionately.

In summary, by using the actual coverage divided by the coinsurance requirement, this option accurately represents how the coinsurance penalty is assessed, reflecting the essence of coinsurance where policyholders are encouraged to insure their property to at least a specified percentage of its actual value.