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

The term "out-of-pocket" in insurance refers to the costs incurred by the insured before coverage begins. This typically includes expenses that the policyholder must pay directly out of their own funds, such as deductibles, copayments, or coinsurance, which are required before the insurance company starts to cover the remaining costs.

Understanding this term is crucial as it informs policyholders about their financial responsibilities when seeking healthcare services or making a claim. It is important to recognize that out-of-pocket costs can have a significant impact on the overall affordability of insurance and access to care, especially for those who may face high expenses before their coverage takes effect.