If your insurance coverage isn't enough, they could seize the LLC assets, but not your personal assets.Additional thoughts:1.

An insurer frequently doesn't even know the use of the property being insured particularly when it a SFR.I have personally had to provide a state investigator an explanation not only of how I reached a coverage decision but document the timeline during which those actions were taken when an insured had submitted a complaint. 

If you are going to use day laborers and unlicensed contractors to do some or all of the work on your properties you may want to take into account that your insurance coverage will not pay out when an accident happens during the course of breaking a law. 

Try to maximize your coverage with syndication websites (rentlinx) or just a property manager, they usually are able to access multiple sites at once as well! 

You may find better coverage elsewhere.

We used a non-QM (Qualifying Mortgage i.e. not Fannie, Freddie, and FHA) that was a DSCR (Debt Coverage Service Ratio) loan with one of our lender partners How did you add value to the deal?

  $1200 rent should cover DSCR loan coverage requirements. 

There is a coverage called Ordinance & Law available for most Homeowners or Dwelling/Fire policies that covers the increased cost of construction due to changes in building codes, laws, ordinances...

It's a complex topic which takes time to learn.Another metric you're going to need to look at is Debt Service Coverage Ratio, DSCR.

Look at DSCR loans (debt service coverage ratio) loans as another possibility.