You're bouncing backwards and forwards from insurance to building regs.
It's all in the building regs. Why do you think the Priory Hall evacuation was ordered?
So, this was a block of apartments that were not inspected and were signed off as
meeting the required regulations, even though the requirements were
not met. The issue, as I'm sure you recall was uncovered when the block was inspected prior to the local council signing off on a tenancy agreement.
To return, again, to the OPs question.
1. there's nothing stopping you from converting and letting out your attic or any other room in the house under the rent-a-room scheme
2. you do not need planning (subject to the notes I've made already)
3. you should make sure you get all the work properly inspected and signed off, discuss this with the builder.
4. on the insurance front; there is no exclusion from cover on the buildings side, your policy may have some restrictions regarding theft where there is no forcible entry. You should review your buildings sum insured when the work is completed.
5. if you can afford to pay the loan without the rent, then I would say go ahead. If you don't like renting, you can stop anytime.