Outofpocket

Out-of-pocket is a term used to describe expenses that are paid directly by an individual rather than being reimbursed by an insurer, employer, or other organization. The phrase can function as an adjective (out-of-pocket costs) or as a noun (the out-of-pocket). The origin is from the idea of money that must be paid from one’s own purse, without external covering.

In health care, out-of-pocket costs include deductibles, copayments, coinsurance, and services not covered by a plan. Premiums are not considered out-of-pocket expenses. Many insurance plans impose an out-of-pocket maximum or cap, limiting the total amount a person must pay in a policy year; once reached, the insurer typically covers remaining covered costs. Definitions and thresholds for out-of-pocket costs vary by country, insurer, and policy.

In business and accounting, out-of-pocket expenses refer to costs paid by an employee or individual that are later reimbursed by an employer. Receipts and proper documentation are usually required, with reimbursement timelines and policies differing across organizations. Common examples include travel, meals, lodging, and minor supplies.

Beyond formal contexts, the phrase is used in everyday language to describe personal funds used due to lack of coverage or affordability, or to indicate financial strain. Although primarily associated with health and business spending, out-of-pocket concepts apply to budgeting and financial planning in other sectors as well.