I get MINIMAL insurance. 

Dad restructured her loan to help, but we've discovered she can't afford homeowner's insurance. 

also what kind of insurance I should need for the real estate involvement LLC ?

Just make sure they have insurance and you should be fine. 

If not, I take the second applicant.So, and I have no idea if accepting the money created some sort of obligation, I would simply mail them a check for the money and a letter stating the applications have not been received so you cannot proceed with approving them. 

Suddenly, my Insurance company (who already binded my policy on closing) is starting to at concerned and is asking A LOT of question such as who will manage the property?

If you finance the property you must purchase flood insurance, rarely or not doesn't matter if it's in the zone. 

You need to talk to your insurance agent about finding the right liability policy and umbrella policy.

If their program shows a lower valuation than what you've listed/applied for, they'll require an appraisal.Alternatively, you can ask them what value their program came up with and if you're OK using that number instead, proceed with it.

In a direct exchange the proceeds from your sale go directly  to the title company handling your purchase.