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I think you are very sensible, after all insurance companies do make money, which means they take in more than they pay out. I do think that for a dog third party insurance is essential, if you have the self-discipline, which I lack, putting money away regularly for vets bills will pay off more...

Unfortunately if your dog causes an accident you can be liable for a bill which you simply can't pay, you don't only pay for vets bills you get third party cover too.