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All You Need to Know About Iceland Car Rental Insurance


Iceland Car Rental Insurance

When renting a car in Iceland, you might be slightly bamboozled by all the insurance options. But don’t worry, we’re here to help you figure it all out!

It’s important to understand which Iceland car rental insurance you need for your trip, so you’re fully covered and protected during your Iceland vacation, especially with the different road types and terrain you’ll find across our magical island.

Let’s take a look at everything to do with car rental insurance in Iceland, including the types of insurance packages that are available and our helpful Iceland car rental insurance tips.

Is Car Rental Insurance Needed in Iceland?

Yes, Iceland car rental insurance is necessary when driving a rental car in Iceland. While there are many types of insurance to consider when driving in Iceland, there are two basic insurances to be aware of: Third-Party Liability (TPL) and Collision Damage Waiver (CDW). 

TPL is a legal requirement, so is often included in Iceland rental car prices automatically. It’s also helpful to know that TPL may sometimes be bundled under CDW in the terms of your rental agreement. Now, let’s explore more about the other types of Iceland car rental insurance you’ll come across.

iceland car rental insurance

What Rental Car Insurance Should I Get in Iceland?

If you’re wondering ‘what rental car insurance should I get in Iceland?’, let us help you answer that question by exploring the different available Iceland rental car insurance options. Here’s a list of Iceland car rental insurance packages you can choose from:

  • Third-party Liability (TPL)

  • Collision Damage Waiver (CDW)

  • Super Collision Damage Waiver (SCDW)

  • Theft Protection (TP)

  • Gravel Protection (GP)

  • Sand and Ash Protection (SAAP)

  • Tire Protection 

  • F-roads Protection

We’ll explore each insurance type in more detail, so you can make an informed decision about which Iceland car rental insurance package is right for you and your road trip.

iceland rental car insurance

Third-Party Liability Insurance

Covering any claims made by someone else (a third party) for damage or medical expenses caused by an accident involving you, Third-Party Liability insurance is a legal requirement in Iceland, so should be included in every Iceland rental car price as standard.

Collision Damage Waiver Insurance

Also, usually included in the price of your Iceland car rental, Collision Damage Waiver is another important Iceland car rental insurance that comes along with any rental vehicle.

This insurance type covers most of the damage in case of an accident, leaving you to pay the difference between the cost of the damage and the excess self-risk amount included with the insurance package. This amount can vary dramatically between companies, so it’s always a good idea to check the terms before you sign an agreement.

Super Collision Damage Waiver Insurance

Super Collision Damage Waiver is an add-on to the standard CDW insurance that you can choose to purchase. SCDW insurance significantly lowers the self-risk amount that you would need to pay in the case of an accident, which is definitely handy with the sometimes unfavorable and hazardous road and weather conditions in Iceland.

Theft Protection Insurance 

As straightforward as it sounds, Theft Protection insurance covers you in the case of vehicle theft, although it’s important to note that TP doesn’t cover any contents left inside the vehicle.

Iceland is famously safe and relatively crime-free, making this particular type of Iceland car rental insurance arguably less necessary than the other types of insurance on this list, but you might prefer to be safe rather than sorry.

Iceland TP insurance

Gravel Protection Insurance

You might have heard that you need Iceland rental car windshield gravel insurance for your road trip around this stunning island. This is due to the large amount of unpaved gravel roads across Iceland – particularly in the more remote, rural areas – that can cause damage to your vehicle’s windshield, as well as the lights and body.

If you’re planning to travel a bit further afield than the main Ring Road in Iceland or even venture into the rugged and beautiful Icelandic Highlands, then you’ll definitely need Gravel Protection insurance to protect you in the highly likely case that your rental vehicle sustains damage from loose gravel and rocks on these roads.

iceland rental car ash and gravel insurance

Sand and Ash Protection Insurance

A unique insurance package in Iceland, Sand and Ash Protection (SAAP) insurance covers you in case of damage sustained to your rental vehicle caused by volcanic ash and sand. With active volcanoes on the island and famously strong winds that can whip up sand and ash, this insurance is definitely a handy add-on for travelers.

We recommend taking both Iceland rental car ash and gravel insurance to protect you when driving in Iceland’s unique terrain.

Tire Protection Insurance

Another optional Iceland car rental insurance type, Tire Protection, covers you for any damage caused to your vehicle’s tires when driving around the island. We highly recommend this type of insurance protection for those planning to travel to more remote locations across Iceland.

F-roads Protection Insurance

Some Iceland car rental agencies offer specialist F-roads Protection insurance, which is certainly advisable to take if you plan to traverse these uneven mountainous roads in Iceland. It’s also worth noting that a 4x4 vehicle is required to travel on Iceland’s F-roads.

F-Roads recommended insurance

Our Reykjavík Auto Iceland Rental Car Insurance

Here at Reykjavík Auto, we have three unique insurance plans available for our customers to choose from:

  • Silver Insurance Plan – This Iceland car rental insurance plan comes as standard with every one of our rentals. Collision Damage Waiver (CDW), Super Collision Damage Waiver (SCDW) and Thief Protection (TP) insurances are all included in this insurance package. It’s important to note that the self-risk amount on the TP is 0 ISK, but the self-risk amount on the SCDW is 150,000 ISK (about $1098 USD).

  • Gold Insurance Plan – In addition to all the insurances included in the Silver Insurance Plan, the Gold Insurance Plan also includes Sand and Ash Protection and Gravel Protection, which are some of the most common forms of damage to vehicles in Iceland. This insurance package is ideal if you intend to stick to Iceland’s easier-to-drive roads. The self-risk amount for this plan is 65,000 ISK (about $476 USD).

  • Platinum Insurance Plan – This comprehensive insurance package for car rental in Iceland is the best insurance plan any car rental company can offer, as it covers most damages with 0 ISK deductible/self-risk and even includes free Wi-Fi. Including coverage for water damage and engine/transmission damage, the Platinum Insurance Plan is our suggested insurance for car rental in Iceland for any Highland adventures, as you may encounter river crossings and rough terrain, especially on Iceland’s mountainous F-roads.

full insurance package car rental in iceland

Iceland Car Rental Insurance Tips

Here are our top Iceland car rental insurance tips to keep in mind to make sure your Iceland road trip goes as smoothly as possible. 

  • Gravel protection is needed in Iceland – With many gravel roads throughout the country, gravel damage is the most common form of damage sustained to vehicles in Iceland. For this reason, we always recommend getting an Iceland car rental insurance package that includes Gravel Protection (GP). That way, you don’t need to worry when gravel or rocks hit your windshield and/or body of your rental car.

  • Maybe skip the theft insurance – If you’re looking for a way to cut costs with your Iceland car rental insurance, we’d recommend skipping the theft insurance if you wanted to skip any insurance type, as the risk of theft is very low in Iceland. Of course, it’s better to have full coverage, so this has to be an informed decision that you’ve carefully thought through.

  • Be careful with car doors in the wind – Keep hold of your car doors when opening them, as Iceland is known for its extreme weather, with strong winds even being known to blow off car doors! Iceland car rental insurance won’t cover you in case of this unfortunate event, so just make sure you’re mindful of this each time you get out of your rental car.

  • Have either GPS or data for navigation – It’s important to have some means of navigating when heading out on Iceland’s road network, particularly when traveling in remote, rural areas. You can likely rent a GPS from your car rental agency or you can use your phone data if you have enough.

iceland rental car insurance

Plan Your Very Own Iceland Road Trip Adventure

Ready to plan your own dream Iceland vacation? How exciting! Take a look through our affordable and reliable Iceland car rental options to get started. We can’t wait to welcome you to this incredible island for the adventure of a lifetime!