@John Kim$7.95 per month on $1,000 coverage. 

Good to hear you are incorporating & streamlining, that is the sign of comprehension and points to future progress. 

Now one option is get  a commercial mortgage that bases the loan on the debt coverage ratio of the property not just your personal DTI.

If you're getting a private loan you will probably need to provide one unless the lender likes you and is willing to take a chance.The policy that was issued to you insures your interest in the property and does not provide any coverage for the lender. 

The claim's probably already on the Comprehensive Loss Underwriting Exchange (CLUE) database so it's not easy to unring the bell. 

If you insure them, they are Personal Property and not Building coverage. 

Also getting an umbrella coverage is cheaper sometimes than an LLC cost so that may be something to look into for the future. 

We had some trouble finding an insurance carrier that would provide coverage.

But the reality is that a cheaper policy that didn't have the right coverage would be like throwing money away if we ever had to use it because the insurance claim would be denied. 

However the zoning ordinance only addresses the "character" of the neighborhood (unit density, setbacks, lot coverage, etc.), while the building code deals with the safety and habitability of the structure.