Your tenants will soon learn your terms and your management style.You can establish a no-smoking policy at anytime with a MTM rental agreement. 

And a title insurance owner's policy is a MUST whenever purchasing property...especially in investing.

Contractors front the money for work, labor, and supply costs and expect a profit for the service and safety they ensure.That said, there are absolutely contractors out there that will take advantage of customers that do not understand what they want or how much it generally costs.

Private lenders and hard money lenders will need a lender's policy of title insurance and their money must be disclosed on purchase HUD at the time of purchase, so clearly you need to tell the seller that a loan is involved within your offer.  

Other than that can anyone think about any downside with having a liability only policy for rentals?

Lenders have more leeway, and thus their policies are what govern the transaction.

One thing I've noticed very clearly appears to be that the major insurers don't write policies within 2500 ft or so of the Atlantic.

Further, we could simply purchase an umbrella insurance policy as protection for the short term.

I may be bias, but I like Farmers policies, but then again I'm an agent for them.

People rely on insurance only and lose their personal fortunes when they find out the lawsuit they're facing is covered by their policy.