Personal Finance
Out-of-Pocket Cost
Out-of-pocket cost summary:
Out-of-pocket costs are expenses you cover with your own money.
An out-of-pocket cost on your insurance generally won’t be reimbursed.
Out-of-Pocket Cost Definition and Meaning
An out-of-pocket cost is money you pay upfront. If it's a work expense, such as expenses on a work trip, your company may reimburse you. In insurance terms, it's what you pay before your insurance kicks in. If you're buying a home, out-of-pocket costs are the things you pay for with cash and that aren’t covered by your loan (such as the down payment).
Key Features of Health Insurance Out-of-Pocket Costs
Most insurance involves out-of-pocket costs. In home, health, or auto insurance, a typical out-of-pocket cost is the deductible, the amount you pay before your insurance kicks in.
Out-of-pocket costs in healthcare include your copays and coinsurance on top of the deductible. Once you reach the limit on your out-of-pocket maximum costs, you won’t be responsible for the cost of covered services for the rest of the year.
In 2024, according to KFF, the average out-of-pocket maximum for healthcare for a single person was $4,409. That means you’d have to spend up to $4,409 on covered services before your insurance foots the whole bill. That’s an unaffordable amount of money for many people. Even with a limit on what costs you could be responsible for, it’s possible to fall into medical debt just to stay healthy.
Key Features of Work-Related Out-of-Pocket Costs
In a work environment, out-of-pocket costs refer to things you pay for upfront while you're working. Many employers will reimburse those costs. If you’re self-employed, you might be able to deduct work-related out-of-pocket expenses from your taxable income.
If you fly to a conference for work and pay for the flight and meals, those are out-of-pocket costs. Most companies have a process for you to submit receipts and get the money back.
Key Features of Home-Buying Out-of-Pocket Costs
When you buy a home, you may find you have to pay a number of costs from your own wallet. Those costs include things like a down payment, home appraisal and inspection fees, moving costs, and other closing costs. You may be able to include some of those costs in your mortgage.
Out-of-Pocket Cost FAQs
What should I do if I’m overwhelmed by medical debt?
Get help as soon as possible. Many people have been through this, and credit counselors and debt relief specialists are experienced in helping people. They can help you understand your options and guide you toward a solution. The sooner you start, the better those solutions are likely to be.
How does Freedom Debt Relief work?
The Freedom Debt Relief program is designed to resolve your debt for significantly less than you owe, as quickly as possible. First, we provide a debt consultation to review various options you have for debt management (including credit counseling, bankruptcy, and consolidation loan), and help you decide if debt relief and our program specifically is right for you. If you decide that it is, we work with you to design a program that fits your monthly budget (keep in mind that it could be less than your monthly minimum payments). Once you enroll, our expert debt negotiators create a negotiation strategy, utilizing data that has been developed over 20 years, so that we can reduce your debt and help get rid of your debt as quickly as possible. Our company has used this method to resolve over $20 billion in debt since 2002.
How long do medical debts stay on my credit report?
Medical debt is treated differently from other debts. In 2022 and 2023, the three major credit bureaus removed medical collection accounts under $500, unpaid medical debt less than a year old, or debts that were previously paid from consumers’ credit reports. A new rule was set to go into effect in March 2025 that would have removed an estimated $49 billion from credit reports and keep creditors from basing lending decisions on consumers’ medical debt, but it is currently on hold due to a lawsuit.
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