I have the funds to re-build if I had a fire without insurance.

Is there coverage for Ordinance & Law (provides for additional rebuilding costs due to code changes)Beware of Actual Cash Value based policies. 

If you want to sell the property getting comps is tough and getting financing is even tougher.Also, as you said, if the property were damaged severely you would not be allowed to rebuild other than SFH.

In higher end markets like La Jolla for example if you pick up a small house rather than do the usual flooring paint kitchen etc. add a master bedroom or in some cases consider tearing down and rebuilding.

In the areas that I invested, there were 3 Major Project during the last 15 years. 1) Brooklyn Barclay's Center, 2) The Rebuilding of the World Trade Centers and 3) the Redeveloopment of the Brooklyn Navy Yard.

You can't not fix it and when the house explodes expect the insurance company to rebuild it.

Couple other benefits of using them for me was that I'm no longer required to insure the house at what it would cost to rebuild in order to get replacement value coverage.So lets say I only owe 100k on the house but I want replacement coverage on it.

Most common is a replacement cost policy, which covers the materials and labor needed to rebuild the home from scratch.

Insurable value is what it would take to rebuild your home in the case of a catastrophic event with regards to Material, Labor, and resources.

In the end, I think the bathroom was under $2K completely redone and total time it took was only a few days (vs a week plus with full demo and rebuild of a new bathroom).