The good news is that she has no lease and nothing to protect her.

Don't waive contingencies or decline certain protections, like a home inspection.

Better protection is an arc-fault breaker, because arcing from missing insulation is one of the dangers of K&T.As for insulating, obviously anything that looks like it is loose or coming apart I would re-wrap with good quality electrical tape (electricity off, of course, when you do this) but beyond that you want to keep combustibles away from the wiring. 

What types of insurance do most investors make sure that they have to protect themselves and their properties against lawsuits / claims from tenants?

When you have more assets or a larger company, states like Delaware, Nevada, Wyoming may make sense if you are looking for charging order protection, anonymity, business friendly case law, etc. 

For me personally, in addition to the extra protection the LLC provides, there is a law that prevents us from having more than 10 conventional mortgages under our personal names. 

I believe our society would be better off if we stopped protecting people from the consequences of their own choices and actions. 

Given this risk I would be talking to a landlord tenant attorney ASAP to protect myself.

Everyone wants to pinch pennies - until something goes wrong.PMC's are like insurance, you don't pay it when things are going wrong, you pay it to protect you from problems.Is this a Class C building?

I'm part of the electorate whose lines are gerrymandered so as to protect the entrenched power and dilute my vote.