A good time to upgrade is when...
In general I think a good balance between keeping up to date with technology and replacing only when needed is to consider replacing it at the first product update after the AppleCare coverage expires. On my iMac, AppleCare was most definitely worth it. on my iPad Mini, I'm most worried about dropping it, considering how many times my assorted iPods have hit the ground (but fortunately the cases protected them) which is why I bought the AppleCare+ for it.
Is it worth it? That's really a personal decision. I can offer up the following however: A good time to upgrade is when you iPad 3 can no longer fulfill your needs. For example do you need an app that won't run on the iPad 3? Another time to think of upgrading is in a couple of years and your battery needs replacement. DO you pay the battery replacement fee or do you buy a new iPad?
In general I think a good balance between keeping up to date with technology and replacing only when needed is to consider replacing it at the first product update after the AppleCare coverage expires. On my iMac, AppleCare was most definitely worth it. on my iPad Mini, I'm most worried about dropping it, considering how many times my assorted iPods have hit the ground (but fortunately the cases protected them) which is why I bought the AppleCare+ for it.