There are two critical dates to understand on an insurance policy: the date of issue and the effective date. The date of issue, sometimes called the issue date, is the day that the insurance carrier agrees to provide you coverage and issues your policy. This can be on or before the effective date, but never after because the effective date is the day that the coverage actually begins.
Essentially, the issue date indicates a contract has been created and sent to the parties involved, but it isn’t necessarily providing the benefits of coverage. The effective date, however, tells you that your insurance company is protecting your home and belongings﹘and that your responsibilities to the insurer, like paying premiums, have begun as well.
This may be surprising, but sometimes you need an insurance policy before you need the actual coverage. One of the most common instances of this is when you want to buy or rent a home, but it can also happen when someone needs to buy a car or lease commercial property. These types of contracts often require proof of insurance.
Let’s take a look at an example to better understand the date of issue’s meaning. Imagine you’re in the process of buying a home, and your lender asks for proof that you have homeowners insurance before they’ll sign off on your mortgage. Escrow is set to close on August 10, but your lender needs proof of insurance by August 1 to get your loan processed and ready in time.
However, you don’t want to insure a property that you don’t own, so you need the policy contract to be issued by August 1 but the coverage to begin on August 10. August 1 is the policy’s date of issue while August 10 is its effective date.
You should also note that you can change your policy’s effective date if you need to. For instance, you may need to push it back if there’s some sort of delay when you’re buying a house. The date of issue, however, does not change.
What happens if you change your mind after your home insurance policy has been issued? Say the seller changes their mind or you get cold feet and you decide you don’t need the policy? You can cancel a policy prior to the effective date and get a full refund. Insurance companies can’t charge you for coverage that you never actually had.
Both the date of issue and the effective date are items found on the your declarations page. The declarations page is a one or two page summary of your policy, including your name, the address of the property, the policy’s issue and effective date, and the limits on the various coverages provided by the policy.
Every insurance carrier formats the declarations page slightly differently, so where the date of issue is may vary. However, it is normally located near the top by your name.
When reviewing the declarations page, it’s a good idea to review all personal details to make sure there are no typos with your name or address. Also, confirm that the coverages are what you had discussed with your insurance representative. Doing so before the effective date minimizes the chance of any problems with coverage once the policy is in effect.