Are there any insurance companies local that will offer “loss of rent” along with the coverage in case I could not have tenants paying me to an unforeseen event like a fire or water damage?

The security deposit must be returned to tenant after their tenure unless the property has damaged equivalent to the security deposit. 

After renting it for a couple of years and a tenant who did a lot of drywall damage, I decided to renovate the home and change the layout to a more favorable layout which was more modern and usable.What was the outcome?

Possibly Thomas Edison:  "Opportunity is missed by most people because it is dressed in overalls and looks like work."

Send her any required notices (claim against security deposit, etc), change the locks for real this time, turnover the unit, and move on.You should be able to charge her (and claim against her security deposit) for removal, disposal, or storage of her personal items, cleaning, damages, etc.

She told us there was water damage to the floor but it looked ok until three days ago they removed the floor and sent us a picture it was black. 

If they damage the property, leave it dirty, etc, you're not going to have to worry about a few dollars in interest.

The neighbor who lives there told me that there was a house before on the lot and was fully damaged by fire and the house was demolished leaving only the lot.

With today's current environment (Coronavirus damaging the economy) have I picked the wrong time to become a wholesaler?

I was quoted around $10k JUST to add the piers to reinforce the existing damage- but without additional drainage and re structuring the damage would continue to the crawl space.