What is the crash tax?

A crash tax is a fine placed on your auto insurance company when you cause an accident outside your state. 26 cities have such laws, but 10 states have banned it altogether.

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Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products including home, life, auto, and commercial and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, largely in the insuranc...

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years (BBB A+). He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like Reviews.com and Safeco. He reviews content, ensuring that ex...

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent

UPDATED: Oct 20, 2021

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Things to Remember...

  • You need to know when crash taxes can be charged, who pays them and the indirect cost
  • A crash tax would be fine that municipalities can charge to the auto insurance companies for sending emergency vehicles to the site of a crash
  • Some states have already come out and banned this crash tax altogether

To make sure that you are getting the best auto insurance rate, enter your zip code to compare online auto insurance quotes now!

The auto insurance industry is fighting against crash taxes. You need to know when crash taxes can be charged, who pays them and the indirect cost.

One of the best ways to understand how crash taxes work is to go through a simulated accident. This will offer an example. Here is a breakdown of the crash tax and how it might affect you:

When an Auto Accident Occurs

Let’s look at what happens in an auto accident. The accident occurs. This might be a vehicle-to-vehicle collision. There might even be some property damage during this event.

There may only be one person involved in this accident. No matter what the accident is, rescue crews are sent out in response to this accident.

Everyone from the ambulance operators to the wreckers descends upon the scene. Cops pick out who was at fault and write up reports. Ambulances take the injured to the hospital.

Fire crews clean up any potential explosive threats. All of this costs money. This is where the “Crash Tax” starts to come into play.


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Who pays for rescue workers?

Local municipalities are now looking to recoup some of the costs for sending rescue crews to accident scenes. These municipalities would like to send your auto insurance company a bill for some of the cost of this emergency response.

The hitch here is that these fees only apply to out of town drivers who are at fault for the accidents.

The key phrase here is “out of town drivers.” If you are driving across the country, you will travel through states that see no taxes from you.

This means that in the unfortunate event that you cause an accident, the cost to deal with this accident is harder to recoup. This is where the crash tax comes in.

How a Crash Tax Works

A crash tax would be a fine that municipalities can charge to the auto insurance companies. It doesn’t matter where you live when you get in that accident. The municipality would bill your auto insurance company some fine for the rescue work that was provided.

As it stands right now, most counties pay for emergency response situations from local taxes. When an out of town driver causes an accident, the money comes out of local taxpayer pockets. You can see where this debate starts to take off.

Many organizations will point out that a crash tax does not fit nicely with existing liability or medical payment policies.

If you are required to start carrying auto insurance to cover these crash taxes, say goodbye to those cheap auto insurance rates!

Some states have already come out and banned this crash tax altogether. Those that have not are still considering how to handle the costs of crashes caused by foreign drivers.

As states and counties look to recover for budget downfalls, don’t be surprised if this auto insurance law issue keeps resurfacing.

Now you have a better understanding of how crash taxes might have ties to your auto insurance rates.

Talk with your agent and find out how the local municipalities might be driving your rates up. You might be shocked at just how much a car accident really costs.

Be sure you’re getting the best auto insurance rates you can possibly qualify BEFORE you’re in an accident. Enter your zip code on this page to get started comparing free auto insurance rates and start saving money!


  1. https://www.accidentresponsefees.com/
  2. https://abcnews.go.com/Business/crash-taxes-slap-drivers-massive-fines/story?id=12377299

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