What occurs when the insured's limits of insurance apply per occurrence?

When an insured's limits of insurance apply per occurrence, it means that the insurance coverage is designed to respond to each individual event that causes loss or damage, up to the limits specified in the policy.

In the context of the correct answer, the situation describes smoke damage to siding caused by repeated acts by the insured's neighbor. Here, each instance of smoke damage can be considered a separate occurrence. If the policy stipulates coverage per occurrence, the insured would have the ability to claim the limit of insurance for each individual incident of damage that meets the policy definitions and conditions.

This alignment with the per occurrence limits allows policyholders to maximize the amount of coverage they can use in response to multiple damages that stem from distinct and sequential incidents. Therefore, the scenario effectively illustrates how this type of limit operates in practice, ensuring that the insured can recover for damages that happen not just one time, but more than once, based on the specifics of each occurrence.