Property coverage for the dwelling applies only to the “residence premises”, so if the rental burns down, the insured's policy provides no coverage. Personal property however is covered anywhere in the world. The normal limits and coverage would apply to any property the insured had in the rental dwelling.

Liability coverage is broader and covers the insured for injury or damages for which the insured is legally liable. Medical expenses are available for someone on the “insured location”, so if someone is injured on the rental premises, there is coverage under this policy. The normal exclusions/conditions apply.

Coverage isn't compromised in that the available limits aren't reduced in any way, but there are underwriting concerns since coverage for personal property and liability is extended to the second property. If the insured rents a beachfront home for 2 months and allows the just turned 21 year old son to stay in the house and have rowdy beer parties every night, your underwriter is going to be concerned about liability and potential property/theft losses and rightly so. An underwriter is going to look at the insured, how long the property is rented for, who's staying in it, how often the rental is left unattended, etc.