The point here is not the raise, but the promotion itself. It's leverage for joining other large companies ("I was a Senior SWE at Google, so you'll need to offer me a Staff SWE role"), and as the OP notes, it lets them come back to the new level without having to go through the promo gauntlet again.

If you cancel the insurance effective from next month, you have coverage until the cancellation date.

Exactly. If you resign before your insurance coverage monthly renewal is effective, you don't get your insurance renewed.

All of this is what "effective" means.

Maybe we disagree on the sequence?

As I understand it, it goes like this:

  1) Employee gets promotion, effective in the future (at #3)
  2) Employee resigns, to be effective after promotion (at #4)
  3) Promotion is to be effective at this date
  4) Resignation is to be effective at this date

In my understanding, the employee's resignation is to be effective after the promotion it to be effective, so that the they would resign with the new/promoted level.

I understand the surprise.

"I resigned just after I had gotten a promotion, but before the date when the promo was effective"

I had interpreted that as being resignation effective before the promotion. But I was probably wrong.