An effective date refers to the exact date and time your insurance policy will officially become active (aka, when your coverage kicks in).
What is an effective date?
An effective date is the time, day, month, and year when your insurance coverage becomes active. It also marks when you’ll have to pay your monthly premium for the first time.
This date goes by a few different names, and is also known as the “commencement date” and “policy start date” – the latter is what we here at Lemonade HQ call the effective date on our policies.
Where can you find the effective date in your policy?
You can typically find your effective date on the declarations page in your policy – it’s usually located on the first or second page.
Pro tip: While you’re at it, be sure to take note of the expiration date as well (to the right of policy start date in the above image). This will be important when it comes time to renew your policy!
Why is having an effective date important?
For renters, having an effective start date is very important, since many property managers and landlords expect you to have insurance from the same day you move into your new pad.
Say you move into your new apartment on June 30th, your property manager and landlord would expect that your effective date is on that very day.
For homeowners, having an effective date is also extremely important. Lenders won’t approve a mortgage until you have insurance on your place. But, you can’t get insurance on a place you don’t yet own!
Yea, it’s a weird Catch 22…
How do insurers get around this? Well, they can issue insurance for a later point in time, meaning they can create a policy for you with an effective date in the future.
What date should homeowners choose as an effective date?
Since you only need insurance once you actually own your property, we suggest selecting an effective date on the same day you expect to close on your new place. Read: the contract is signed and house is officially yours.
If you aren’t sure when that will be, it’s okay to be off by a few days, but try asking your attorney for an estimate if you’re really unsure. Since you haven’t actually yet paid for your policy (that only happens on the effective date), you’ll have the ability to move the date around to make sure your coverage starts from the minute you own your new home.