Out-of-Pocket Expense

What Does Out-of-Pocket Expense Mean?

An out-of-pocket expense, in the context of insurance, refers to costs that are not covered by the insurance policy. The policyholder must pay these expenses using their own financial resources. Depending on the type of insurance and the specific plan, the insurance company may reimburse the policyholder for a portion of these costs.

These expenses are also referred to as out-of-pocket costs.

Insuranceopedia Explains Out-of-Pocket Expense

In health insurance, out-of-pocket expenses include deductibles, copayments, coinsurance, and the costs of healthcare services not covered by the policy. Policyholders are typically required to pay these costs up to an annual limit before the policy begins covering eligible services.

Similarly, out-of-pocket expenses can refer to a deductible for car insurance or other auto-related costs, such as car rentals or lost wages resulting from necessary repairs after an accident. In such cases, the insurance company may reimburse the policyholder up to a specified limit.