Goodcover, the insurtech company supported by Y Combinator and focused on returning unused premium funds to customers, has announced the completion of a $7.5 million Series A investment. Goodwater Capital spearheaded the funding round, with additional contributions from Fuel Capital, Broadhaven Ventures, Global Founders Capital, Liquid 2 and TransRe.

Emerging from Y Combinator in February, Goodcover aims to determine premiums as accurately as possible through a proprietary machine learning underwriting system. The company reinforces this commitment by distributing any remaining premiums back to its customer base. This year, Goodcover successfully issued a dividend to its users, equivalent to 1.89% of the premiums they had paid.

“Our approach isn’t about overcharging and then refunding a portion,” explained CEO and co-founder Chris Lotz during the company’s initial launch. “It’s a commitment to ensuring we don’t charge more than necessary from the outset.”

The company functions as a managing general agent, meaning it designs policies, establishes pricing, and develops its own risk evaluation methods, while collaborating with insurance companies for capital reserves and policy issuance. This model resembles that of Hippo and other emerging insurtech businesses, differing from companies like Lemonade that operate as their own insurance carriers.

Initially available in California – a state known for its stringent licensing requirements – Goodcover intends to utilize the new funding to expand its operations to additional states throughout 2021 and broaden its national coverage.

Eric Kim of Goodwater Capital shared the following statement regarding the investment:

Goodcover also intends to grow its team with the help of this funding. Currently comprised of just five individuals, Lotz acknowledges the need for greater diversity within the company.

“Increasing diversity is a top priority as we move forward,” Lotz stated. “It’s crucial that our company’s composition mirrors the communities we serve. We’ve addressed the existing systemic inequalities within the insurance sector and believe we have a significant opportunity to drive positive change.”

While specific membership figures were not disclosed, Goodcover reported a monthly growth rate of 30% and anticipates reaching 10,000 members by the beginning of the following year.