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You need to "pack your radiator". I do it by running my engine after warmed up at about 1500 rpms with the cap off and adding aditional coolent then. Put cap back on before you let rpms drop
On an '87 it's pretty easy to look down the radiator neck, look at where the sensor is mounted, and judge if the coolant is above it. If the sensor is in coolant and the light is on, you either need a new sensor, or it needs to be cleaned. Coolant sludge can get stuck in them and they won't work properly.
I assume you mean the light is always on, or does it come on while driving?
THe sensor is just a little blade of stainless. DO NOT CHANGE THE SENSOR.
Try looking for a cracked hose that goes from the radiator to the overflow tank. If you add water/coolant, and it ends up in the overflow, it's either a leaky hose somewhere on the engine, or a bad cap.