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Yes, diabetes is common in dogs and does cause increased water consumption and increased urination and frequently results in urinary accidents in the household. It is only one of several conditions in dogs (usually older dogs) that result in increased water consumption and urination though.
I would recommend having your dog examined by a vet and having some blood work done as this is always the first step in trying to make a diagnosis in these cases. Know that many of the conditions that have these sympotms are very treatable, so the sooner a diagnosis is made, the sooner the problem can be gotten under control.
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