Technically the house is not out of code, however, if there were to be an electrical surge it could damage appliances plugged into ungrounded outlets or potentially cause a fire.

Charge the tenant that did the damage. 

Without knowing whether they are gas, electric, or oil I can't tell you a lifespan.The water heaters are the concern for preventing further damage.

Threaten her with seeking damages? 

ANYTHING, including light fixtures were taken, druggies will do a thousand dollars in damage just to get something they sell for $20. 

I have a house with major fire damage.

Being a student myself a couple of years ago I am very aware of the damages and issues that can come with renting to students.

I met one set of parents and he had a legal pad of questions for me including crime rates, subletting contingencies, alarm systems, etc.I chose the 1st couple as they know the area (it's transitional), will pay the pet fee though it's unlikely their pets will cause damage and generally were a laid back couple.When I sent my sorry email to the college roommates, they came back with an offer of +150/mo in rent.To be honest, I anticipate the relationship to be higher maintenance than with the 1st couple BUT it is a significant bump in rent.Thoughts?

Do I need to take out addt'l coverage if something like a tree fell on the garage roof and damaged his car?

The kitchen cabinets are all damaged, under sink is damaged and molded and water damaged.