Do you require the tenants to have renters insurance AND do you make sure the renters policy does not have a dog bite / dog breed exclusion?

But they're not compelled to stay or accept the rent increase either.

We offered and they accepted.

This happens periodically and could end up with you either accepting the same sub par returns on your REITS as your rental portfolio. 

Is it fraud , no they are telling you the cost up front , you accept or decline . 

Let her know what you know, that it's not acceptable, and tell her she can go the easy way or the hard way.

Both of these options "should" drive your premiums down a good amount, and hopefully to a more acceptable level. 

Buyer ultimately pays it all, anyway, as seller factors in costs before accepting offer.

It may be a little too late since you accepted the insurance money already, but typically you would have a contractor in place (Ideally multiple quotes) before accepting the amount quoted to you by insurance.If your insurance company referred you this company though then after doing more research on them maybe they are the best option?

My HOA only allows one pet but my tenants have a service dog and 2 ESAs and the HOA accepted them.