Whenever you are buying a property out of state you should do a few things to ensure it's as smooth as possible.

If you want to ensure 100% total compliance, hiring an unrelated 3rd party to manage properties would be wise. 

Is this all I need to do to ensure that I secure the lien for another year?

My two cents when choosing a company is to ensure that they are accredited and licensed, there are many choices to choose from, but it is important that you find a good fit for your needs as an investor.

Holding out ensures the contractor comes back and finishes the job otherwise they don't get paid.

Is it worth paying this much to ensure I'm protected?

Even though we are 45 - 60 days out from closing (buyers will work with us on the closing date to ensure we can line up replacements,  I am beating the bushes right now. 

That means they want to see your income to ensure that if you shut the LLC down they can still get paid.

Life Insurance Companies have long-term liabilities (policies) and they need to invest their monthly premiums in order to ensure that they are getting the return necessary to pay out on those policies.

I am not sure that your proposed agreement structure ensures that all parties' interests are aligned.