I purchased additional umbrella insurance beyond the rental dwelling insurance.

Two unrelated ladies had 1/2 interests in basically 7 adjoining properties/dwellings along a river and one refused to sell.

Alternatively, you can create at least one ADU (Accessory Dwelling Unit) and perhaps a Junior ADU on your property.

Again, disclaimer -- I'm not an expert -- but if your intent is to keep this as a 2-family dwelling, you should be safe based on your legal nonconforming status.Another element to this is the rebuildability.

I assumed SFD stood for "single family dwelling". 

The project was to remodel the house and turn the detached garage into an accessory dwelling unit and then sell it.

A dwelling policy for the house would not be more than $800 a year. 

Recover damages based upon the diminution of the fair rental value of the dwelling unit;  (this does not apply) or...4.

Does anyone have any recommendations on insurance companies that provide coverage for vacant dwellings?

Usually, it takes anywhere from 48 hours to 10 days to draw documents & fund the deal, and the HML usually can not draw docs or fund they we have all the required details from the borrower such as verification of down payment (if required), copies of company papers if purchasing in a company name, as well as a title commitment, closing protection letter, wiring instructions, and evidence of vacant dwelling insurance.