I don't know what that means in terms of coverage if say your house burns down, could the insurance company not pay out a claim due to you having more than 1 family living in a "single" family house.  

Long term, I would like to just keep buying and holding, I would like my W2 job to be a supplemental income with my real focus being in real estate, and if I do decide to quit my job, that will hopefully be a realistic option on the table. 

The issue you may run into is the 1.25 Debt service coverage ratio required.

Where I am stuck is in finding insurance coverage for a situation where the tenant plans to have short-term sub-tenants.

And even then (if they know you), you and the attorney will have work to do (with title insurance coverage, etc.) to make it happen.

If you do and have a claim for your rental propertty, you won't be covered.For your rental dwelling policies, you will want loss of rent and business liability coverage included. 

I am not an insurance agent or an attorney but you could call your insurance company and they can let you know your coverage and options.I also carry a personal umbrella insurance policy as added protection just in case.  

The best time to make big changes is immediately, supplementing your tenants rent when below market is charity not business.

I wanted to supplement my reading with other sources of information, which lead me to the Bigger Pockets podcast.

When would you have some time to connect on the phone to discuss the various options and coverages?