I am an independent insurance adjuster who gets hired by insurance companies to know how much a remodeling project is supposed to cost.

I wanted to do this because banks wont lend to anyone wanting to buy a place doesnt have title insurance, but since these people pay with cash, the insurance wouldnt matter!

Sometimes the fees are killer there.If you're getting a loan, likely they will require title insurance. 

The situation is this: my HOA is getting several claims from homeowners who want something that is already clearly not allowed by our CC&R’s.

I think the most challenging part may be to locate the original homeowner and to convince them to deal with you.

I am leaning towards 1 mil in liability insurance and 2 mil in umbrella as my rental asset is worth about 250k.

Yes, you can go to the home and offer the homeowner a deal that keeps them out of foreclosure and pay their tax bill or you will pay it off by the foreclosure date (try to do it about a week early  to make sure there's no foreclosure that goes through anyway for a communication problem). 

What happened was the homeowner went through and restructured the home without pulling permits or notifying the county, is this a deal breaker?

The insurance companies state, that it is. 

They definitely tack on things like insurance etc