I imagine, 80% LTV long term amortizatized debit under 5%, no balloon, no early payoff penalty, 

Hi there! I am a real estate investor in North County San Diego. Recently, I started a meet up specifically geared towards empowering people of color to use Real Estate as a vehicle to build generational wealth. 
Why...

This would seek to protect everyone's interests but more importantly, friendships.

Both options seem good but because I'm still in the newbie phase, seeking advice. 

Should they still only offer the renewal without the water damage coverage, seek out other quotes. 

I’m going to seek out another lender now.

Jonathan, I'm sure your intent was to help but honestly, you did not answer my questions, at all, and your line of questioning is more so personal than seeking info to actual answer the premise of what was asked.

What's the best way to seek out good contractors

I would advise that you have all contracts with your contractors and subs to state timelines as well as bonuses for finishing early (without sacrificing quality of course) and penalties (per diem) for finishing late.

As for your lease, it may make sense to break it and pay the penalty.