I thought this would be best for asset protection and to do it when I had time.

The protections mostly revolve around liability like if you get sued by a contractor, buyer, tenant, or someone getting injured on your property. 

Bottomline, rental property is an investment and it is essential that you protect your investment.

I was wondering how an ADU is looked at in terms of insurance and asset protection?

I was wondering how an ADU is looked at in terms of insurance and asset protection?

I'm not an attorney, but I think you will enjoy the same liability protections after the 'signing off' as you would have had the seller used a local plumber.

I like the liability protection that comes from separating out the businesses.

No need to create a business entity, for those who are truly small (just be sure to beef up your insurance, if you don't have at least a properly run LLC, which will cost you a few hundred a year - the insurance is cheaper for those with one or two places and who own a house, cars, boats or have liquid assets other than IRA/401K -- which are somewhat protected).

States put real estate license laws into place to protect consumers. 

So, while you'll need to offer an incentive to a PMC to find suitable tenants and not just throw anyone in, you'll have to protect your downside somehow.