Out Of Pocket

What Does Out Of Pocket Mean?

In the context of insurance, “out of pocket” refers to health care expenses that the policyholder must pay using their own financial resources. Many health insurance policies include an out-of-pocket limit or maximum for a given year. Once a policyholder reaches this limit, the insurance company typically covers all remaining insured health service costs for the rest of the year.

Insuranceopedia Explains Out Of Pocket

Examples of out-of-pocket expenses include a $500 deductible, a $20 co-pay for specific health services, and 20% coinsurance payments after meeting the deductible for additional health services. Once these expenses collectively reach the out-of-pocket limit, the insurance company covers all insured health benefits for the rest of the year.

The same idea applies in other lines of insurance. With auto policies, for example, your deductible is what you pay before the insurer covers the rest of a claim, and the choice of whether to raise or lower your auto insurance deductible involves a similar tradeoff between your monthly premium and what you pay when something happens. Pet insurance works the same way, with a deductible the policyholder pays on a vet visit before reimbursement kicks in.