Definition - What does Out-of-Pocket Expense mean?
An out-of-pocket expense, in the context of insurance, refers to expenses an insurance policy does not cover. The policyholder would therefore be responsible for paying these costs using their own financial resources. Depending on the insurance type and plan, the insurance company may reimburse the policyholder for some of these expenses.
It may also be known as out-of-pocket costs.
Insuranceopedia explains Out-of-Pocket Expense
In terms of health insurance, out-of-pocket expenses include deductibles, copayments, coinsurance, and costs of health care services not covered by the policy. In this case, the policyholder is obligated to pay these costs, usually up to a certain limit per year, before the policy pays for covered services.
Similarly, an out-of-pocket-expense may refer to a deductible for car insurance or other auto-related expenses, such as car rentals or lost wages due to necessary car repairs after an accident. In case of the latter, the insurance company might reimburse the policyholder up to a certain limit.
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