The best thing to protect you would be enough insurance, like an umbrella policy. 

You really need to look at your policies, inspect the units every 6 months and make sure smoke alarm batteries, t-stat batteries, and HVAC filters are changed.

I reviewed the insurance requirements for the new servicer and it appears that they will allow a repair cost policy. 

The property has some exterior issues that will most likely prevent us from obtaining a traditional landlord or home owners insurance policy.

It would be close to imposible to find a competative insurance policy for a contractor who also manages rental properties for others.

As soon as you close get an insurance policy that will protect you if there is a loss.  

I could leverage my 401K or whole life policy, but my greatest source of funding would be a HELOC on my paid-off home.

It isn't a MI company (not sure if that is a requirement) but I am in Michigan and use Affinity Group Management (http://www.nreinsurance.com/) The actual policy is written out through Lloyds of London.For coverage amount around 50K I pay roughly 23 a month a house and for coverage amount around 145K I pay roughly 60 a month a house.

Take a loan from a cashflow life insurance policy and pay it back afterward (yours or someone elses)9.

Roger that, understood.In FL, the difference to the seller for the increased sales price is only about $13.00 per thousand.The seller pays the Doc Stamps on Deed and Owners Policy in most counties in FL, except for like Broward, where its customary for the seller to only pay the Docs Stamps on Deed.So in most counties, for every $1,000 in higher sales price it only costs the seller $7.00 for docs stamps on deed and about $5.00 to $6.00 in Owner's Title Policy, therefore my above example of paying $10,000 more only cost the seller about $130.00 more.That is unless the property is not homesteaded and/or the seller has to pay Cap Gains tax, then of course the sales price would need to be structured in a way to compensate.But getting past these intricacies, in General, if realtors and loan originators, they will give their buyer more loan options and better ensure more deals close.