Definition of Out Of Pocket Maximum

Out of pocket maximum is the amount of expenses that an insured has to pay from his pocket for treatment in a year and the rest of the treatment cost will be covered by the insurance company. There is a condition attached to it that the nature of medical expense paid to be considered as out of pocket maximum should be covered by the insurance.

The aim of the out of pocket maximum is to reduce the burden of the person. Assume a person had an accident and it took three years to recover fully with a total expense of $75000. Now the annual income of the person is $30000. The injuries caused by accidents were covered in the insurance without a pocket maximum of $10000 a year. This way the person injured has saved $15,000 ($75000/3 - $10,000) a year that was covered by the insurance company.