Many of those people are long-term renters, and will take great care of the place.

Do I get landlord insurance AND renter's insurance with the roommates? 

Here are a couple I've thought about--Have your tenant get a renters insurance policy.

And, given what I mentioned in point 4 above, the number of short-term renters should keep increasing.

Per Santa Monica rules, I am required to provide similar housing for $165/day.I required my renter to have renters insurance, however it’s only $1000 (my first mistake). 

My current renter has 2Pets and it’s been quite lucrative :)

They are still just renters. 

When I am switching a renter from their first 12 month lease to a month-to-month lease they are sometimes nervous about not having the security of a 12 month lease.

RIGHT TO ENTER: You consent to our entering your apartment during reasonable hours for any inspections (by us or prospective buyers or renters), maintenance and repairs, pest control, for delivering notices, and for other purposes as provided by law.

I've had clients who rent out a room in their Lakewood townhome to short-term renters and do great.