Your property is probably not zoned for multi family dwellings if it's right down the street from single family structures, but it could be.

A short list:Liability- Bodily injury and property damage, medical paymentsProperty- the dwelling, optional contents coverage (un fixed appliances), loss of rents.Insurance policies are considered contacts of adhesion..

Dimension of the lot: 175.35399.9260.55Since that will be my first time to develop a land, I am looking to figure out what are the proper steps subdivide this land and how many houses would fit in this land with minimum lot of 10,000 Square foot and minimum dwelling of 1600 Sq foot.

Therefore the site would have non-conforming rights to have 2 single-family dwellings at the site.A building permit was recently issued for a residential alteration at the site... xxxxx"There are two separate structures on the site (one being a duplex and one being a SFH) as she mentioned but I am curious if it would it be impossible to legalized the downstairs unit now since the zoning has been tightened. 

I don't know how this particular deal was structured given 12 units in total, however bear in mind that anything over 4 units in a dwelling is considered commercial.

Had confirmed with city planning before buying the land that each site can have one Dwelling Unit (DU)  or a two-family housing (two individual DUs),  and a possibility of a Duplex in the future.   

Get a rental dwelling policy for the rental unit(s) with a minimum of $500,000 in liability protection, a liability policy for the LLC with the same minimum and an umbrella policy over everything else of 1 million or more. 7.

It's considered a dwelling and you can get conventional financing. 

Up Front Mortgage Insurance Premium - For most of its mortgage insurance programs, FHA collects an: Upfront mortgage insurance premium (UFMIP), and Annual insurance premium which is collected in monthly installments Mortgage Insurance Premium - For 15 year and greater than 15 years. 1.75% of purchase price Annual Insurance Premium Greater than 15 years & greater than or = 95% LTV - 0.8%Greater than 15 years & less than 95% LTV - 0.85%Less than or = 15 years & Grester than 90% LTV - 0.7%Less than or = 15 years & less than 90% LTV - 0.45%High Balance Loan Amounts Less than or = to $625,000 & less than or = to 95% LTV - 0.8%Less than or = to $625,000 & greater than 95% LTV - 0.85%Greater than $625,000 & less than or = to 95% LTV - 0.1%Greater than $625,000 & greater than 95% LTV - 0.105%INCOME—RENTAL Rental income from a borrower’s primary single family residence (boarder income) is not acceptable for qualifying.Rental Income from the subject property may be considered effective income if the subject property is a 2-4 unit dwelling.

I've found Vermont Mutual pretty good for dwelling policies for older multifamily properties.