The coolant temperature sensor functions the same way as the intake air temperature sensor. It is a variable resistor. The hotter it gets, the lower its resistance becomes. The sensor is tested by disconnecting the wire harness, then subjecting the sensor to changes in temperature and measuring the resulting resistance change at the terminals. This may be done with water bath and a thermometer. Heat the water, watch the thermometer and measure the resistance between the 2 terminals of the sensor. The resistance values must be accurate over the range of the sensor; if not, replace the sensor.
The sensor is replaced by disconnecting the electrical connector, then unscrewing the sensor. Be careful not to crack the sensor case and use very little thread sealer, if any.