AUSTRALIANS are spending $1billion a year on medical costs for pets but tough economic times are forcing pet owners to take out health insurance for pets.

Rising veterinary costs and households keeping closer tabs on their budgets have driven more pet owners to consider extensive insurance packages.

Adding to the costs are new state of the art treatments becoming available, Australian Veterinary Association president Dr Mark Lawrie said.

"Pets can now have MRIs and CT scans and there are more options available for the treatment of cancers and other diseases," he said.

Medibank Private introduced a pet insurance package in December.

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