You may have heard of a relatively new product, pet insurance. Like health insurance, it pays vet bills, or a portion of them, when your dog or cat needs medical attention. Should you buy it?

There are basically two types of insurance: catastrophic and unforeseen. Catastrophic insurance covers you for things you couldn’t possibly pay for on your own. Your health insurance covers you if someone in your family has an accident or serious illness and may not be able to pay for treatment. Auto insurance covers you in case you cause thousands and thousands of dollars of damage to someone else. You cannot do without catastrophic insurance.

Incidental insurance, on the other hand, helps you manage your money. You pay a little each month in premiums, and then when you need it, the insurance company covers the expense. Vacation insurance and extended warranties fall into this category. So does pet insurance.

There’s a better way to handle all of your incidental insurance: be self-insured. Any time you’re tempted to buy any type of non-catastrophic insurance, figure out what you’d pay each month for it. Instead of paying that money to an insurance company, put it in a separate bank account. When an expense comes up, you’ll have the funds on hand. Better yet, you can spend it how you want, with no deductibles or limitations. Plus, by depositing money for all unexpected insurance in the same account, you can spread the risk. And if you are lucky and have no claims, you can keep the money!

The problem with this plan is that sometimes you may be tempted not to put the money aside. For this to work, you need to find an automatic way to deposit the money. Does your employer automatically deposit your paycheck into your account? Most of them have the ability to make two direct deposits instead of one. Ask them to put a certain amount into your ‘insurance account’ and the rest into your regular checking account. Or maybe your bank can automatically move a specific amount from your regular account to this new account each month. Or if you have the discipline, you could pay it every month as a bill.