, or just taking some of their investment off the table (risk reduction), generating a partial taxable event to be used again operating loss carry forwards, etc. 

Get a $5k deductible and protect yourself against total loss.  

This loss is expected and not a problem.

One month of vacancy would cause a negative cash flow that would take far too long to recover from.

Investors buying 5% cap rate properties are most likely banking on rental increases while taking appreciation losses on their taxes as well as mortgage interest.  

Both my properties are cash flowing around $200 per month but as I mentioned I have only had them for a few months (will have them about 12 months by the time I am ready to purchase my next) and I am not sure if lenders would recognize that as income or actually count the mortgage payments as a loss in the debt column.Any advice or insight on this would be greatly appreciated. 

M2M because if tenants break the lease you need to actually prove that you did your best efforts to find another tenant before you can actually try to recover anything due to lease breakage. 

If you fail, you are young enough to recover.  

We figured we'd have to take her to small claims court or just eat the loss.

And you can't switch insurance companies because they all know as you will be required to give loss runs when you try to get new insurance.