Everything you said is exactly why-- debt levels, market demand, associated costs(taxes & insurance).

STR insurance provides broader coverage, including liability, property damage (even non-guest-related), and gaps Aircover might not cover.For damages caused by guests, document everything (photos, receipts, estimates) and file a claim through Airbnb.

There is life stages to investing, and the math is clear that strategic debt use, strategic leverage, pyramiding, appreciation, is the wealth generator. 

I think it's great as it includes warranty information for appliances, type of hvac filter, light bulbs and general maintenance etc 

if you are going to do things like include utilities, or have an off street parking spot, other amenities etc, there's no reason in my mind you couldn't "charge a premium" for a premium unit/service. 

We have an insurance policy on the rental house (through State Farm), that includes a personal liability section, which is essentially equal to our current net worth.Given that a tenant could sue for more than this if an accident occurred, we are thinking about adding either LLC or an umbrella policy (or both) as extra protection.Any advice on which way to go, and if LLC, any recommendations for a law firm or company the Indianapolis area?

Current monthly pymt is $2795 (including $640 escrow).

I really like having multiple opportunities to make income from 1 property, including a worst scenario of converting all the units to LTR. 

Lots of folks come up from Ventura County, including many who responded to your post. 

Eliminate debt, establish a budget, and save.