At this stage, I don't think I need to set up an LLC, but I see a lot of people recommending getting an umbrella policy.

umbrella

If the judgement exceeds your umbrella, they will start selling your assets until you get to a point where you can satisfy the entire judgement. 

Most savvy investors combine some sort of process that includes insurance and an umbrella policy.

Minimum liability limits of $500,000 (we recommend also having them buy a personal umbrella!)

Quote from @Julien Bartolo: People protect themselves by setting up an LLC or using umbrella insurance.

I can’t put the rental in an LLC as it’s already under loan backed by Fannie May.I thought it would be okay then to just build a wall around my other assets, as well as mitigate risk.Was planning to put my 100% owned undeveloped land into an LLC, which should give it protection, and also and Land Trust for privacy.My retirement accounts and my primary residents(in Texas) should already have ample protection.Was thinking to set up another trust and LLC for my investment accounts, and possibly move offshore.Then I was thinking for an umbrella insurance policy and risk mitigation techniques like fire extinguisher in rental, evacuation plan, notice about possible hazards, etc. to be put in rental contract.Am I missing anything?

2) Regarding insurance: would the owner then have a homeowner’s policy for the original primary residence house, and then a landlord insurance policy (and subsequently landlord umbrella insurance) on the ADU?

Make sure to get an umbrella policy as well. 

Usually you would get an umbrella policy above your liability policy if you are worth more than 6-700k.