It's always a safe strategy to buy a better property in a better neighborhood than just chasing cash flow that is not even guaranteed or buying in class C and D just to cash flow. 

Your lender is going to ask for guaranteed replacement policy because you probably cannot rebuild in that case, going to be a catch 22.Been there, not in FL in CA.

How can we guarantee that it will be insured and what can we do it it lapses?

I guarantee you'll be here in a few years, maybe you will   last 5-- and post about your stories as to why not to buy a D- property.  

And yes all of these people are personally guaranteeing the payment of these "business" cards. 

its guaranteed. 100% irrelevantHUD Does Not Pay Security Deposits Those that do not have the SD you are not renting to, it's all about screening.

Everyone involved personally guarantees the commercial loan.

The subdivision goes from 150k to 1 million in price.If your friend owns other properties that are trophies I would definitely cross-collateralize some or all of his other properties and get a personal guarantee.

No report guarantees safety.

I just talked with a Behr Rep and their new Dynasty line of exterior paint is expected to last 20 years, and that's in the desert..Personally after having been in the painting industry for over 40 years there is no paint that can be guaranteed to last 20 years.