When an insurance company is giving you a rental car allowance or reimbursing you for a rental it is for loss of use of your vehicle for transportation during the time that it takes to repair your vehicle for the damages it sustained. The $25 a day amount appears to be the rental car allowance limits that the at-fault party's insurance policy allows for. Insurance companies do not usually have to supply you with money in which to get a same class vehicle as yours that is being repaired. State laws may also play a part in a rental car allowance or reimbursement.

For example the Idaho Department of Insurance notes that when you notify the other party's insurance company of your claim, you should ask them if you are entitled to payment for a rental car or other substitute transportation. While the insurance company must tell you how much they would allow for a rental car or other transportation, they do not have to commit to making any payments until it becomes reasonably clear that their policyholder was legally responsible for the accident.

Simply stated in ID, once the insurance company knows that their insured is going to be more than 50% at fault (where two parties are involved), they must commit to paying for a rental car or other substitute transportation.

Keep in mind that Idaho insurance rule/code requires an at-fault driver’s insurance company to reimburse you for the cost of a rental vehicle in proportion to their liability. For example, if the insurance company allows $30 a day to rent a car and their insured was found to be 60% at fault, they would only reimburse $18 a day to rent a car.

Regulations do not specify the type of rental vehicle, this is true in Idaho and other states. If your damaged vehicle is a specialty vehicle, the insurer does not necessarily have to pay for a rental of the same type. If the insurer offers to pay a flat amount (for example, $20.00 per day), the insurer should tell you where you can rent a vehicle for that amount.Again this vehicle does not need to be the same type of car as the one being repair but a vehicle to give you transportation while yours is in the shop being fixed.

An insurer is only obligated to reimburse you for a rental car, or other substitute transportation, for the period of time it would normally take to repair your vehicle; or, in the case of a total loss, until they make you an offer of settlement. If your vehicle is able to be safely driven, the insurance company will only pay for you to rent a car when your vehicle is actually in the shop for repairs.

To find out what your state's insurance laws are regarding this topic, contact your state's Insurance Department.