Owners are at risk of seriously underestimating the time and expense that having a sick or injured pet can have on their lives and fees for vets are expected to continue to rise by almost 20% over the next three years.

Pet insurance can be a minefield for the uninitiated and its complexity is deterring consumers from taking out cover, according to financial research company Defaqto.

It says that because different insurers pay claims per year or per condition and also place limits on some claims within a year that consumers have no idea which policies to take out.

A cat typically lives for 14 to 15 years and its care can cost as much as £9,500 in its lifetime. A dog lives for around 13 years and costs between £500 to £1,000 a year on average.

And Christmas is a prime time for to get into trouble. Not only is there all the rich festive food and drink that owners could feed their pets, but also packages, parcels and wires left lying around to get chewed and gnawed.

Pet insurance should cover vets fees, treatment for long-term conditions, death by illness benefits, death by accident benefits, rewards and expenses for stolen or lost pets, and dental treatment.

While pet insurance can save you a fortune should your cat or dog become seriously ill, it can also be massively restrictive.

One reader contacted Money Mail to complain that, as a pensioner, he had been priced out because he was expected to pay £552 a year for a policy for his 15-year-old Lhasa Apso dog, Candy.

He says: 'It is unfair on older people with older pets. I just cannot afford this.' Defaqto's head of insurance, Brian Brown, says: 'The complexity of policy wordings, lack of easy comparability between products and massive differences in premiums quoted may partly explain why the take-up rate is apparently so low.'

And many policies are not as good as they can be. For example, some will allow you to claim for the same condition repeatedly, but there will be a limit on the total amount you can claim each year. Check what this claims limit is. These have good cover but are frequently expensive.

Others will only allow you to claim once for each condition. Make sure the limit per claim is more than £5,000.

Buying pet insurance is much the same as buying home or motor insurance. You need to check what the excess is - that is how much of each claim you will have to pay.

Remember that the cheapest may not necessarily be the best since it may not cover claims likely to arise for your pet's circumstances. You may also want to consider a policy with third-party liability cover in case your pet causes harm to another person.

Try to aim for a policy that covers the pet for its lifetime because contracts renewed annually exclude any condition experienced the year before.

Check also whether your pet wil be excluded when it gets older.

KIM BALL thinks that without pet insurance she would have had to fork out more than £8,000 for treatment for her wonder-dog, Bailey, who has recovered from cancer.

Springer spaniel Bailey (pictured) was eight months old when bone cancer ate away his knee.To prevent it spreading, Bailey had his leg amputated then underwent six months of chemotherapy.

There followed 18 months of rehabilitation for Bailey and the Ball family, mum and dad Kim 42 and company owner Michael, 44, and children Maria, 22, Daryl, 15, and Charlotte, 11.

Bailey has now fully recovered and takes part in agility classes with other fully-able dogs. Kim pays £18 a month for a policy with Pet Plan.This has covered all of Bailey's vet bills and chemotherapy.

Kim says:'I think that if we did not have the insurance policy then we would have had to put Bailey down.We would not have been able to afford it.'