What does the term “out-of-pocket” refer to in insurance?

The term “out-of-pocket” in insurance specifically refers to the costs that the insured pays directly for services that are not covered by their insurance plan. This includes expenses such as deductibles, copayments, and coinsurance, which are the portions of medical costs that the policyholder is responsible for. Out-of-pocket costs can be critical to understand because they can significantly affect the overall financial impact of healthcare services on the insured individual.

When a person receives medical care, certain services may not be fully covered under their insurance policy. In such cases, the insured is required to pay a portion of those costs directly, which constitutes their out-of-pocket expense. This understanding is essential for consumers to manage their healthcare finances effectively.