Iceland is a fantastic place for a road trip. With the ring road that runs around the coast and the F-roads that lead up to the highlands in the interior, you can access all that our incredible island has to offer. Renting a car will certainly be your most valuable purchase for a trip to Iceland. So if you decide to hire a car in Reykjavik, it’s a good idea to be aware of Iceland’s laws regarding driving, as well as Icelandic insurance policies.
What is CDW Insurance?
CDW stands for Collision Damage Waiver. It means that the rental company is waiving their right to consider you fully liable for costs if the car is damaged under your care. It is also sometimes referred to as LDW (Loss Damage Waiver) but for some companies, these are separate and have different inclusions. There is a set excess, which varies depending on the rental company.
When renting with Reykjavík Cars, the self-risk excess is 350.000ISK and is included in all of their rentals. It is designed to give you peace of mind; that if you are involved in an accident, the costs are limited to a specific amount. There are some types of damage that are not covered by CDW insurance, so check the terms and conditions for a full description of what you are protected for. CDW is the most basic third-party liability insurance for car rentals, and there is additional coverage offered for an added fee, which I will discuss later.
Can I Waive the CDW Insurance?
Yes, and no. CDW is mandatory in Iceland, and so at Reykjavik Cars we decided to include it by default in our rental agreement, so the prices you see on our website already include the cost of this insurance.
However, some credit card companies, and travel insurance providers, offer their own form of CDW and other auto insurance to cover rentals abroad. If you wish to purchase CDW elsewhere, this is, of course, fine, just contact your car rental company in Iceland and let them know. When you pick up your car, you will need to sign a resignation document so that your rental can be linked to the CDW you sourced yourself. However, since Icelandic CDW is mandatory here, the service is already contracted and paid to separate Icelandic insurance companies, and so this amount cannot be deducted from the rental’s final price.
Reykjavík Cars, and every other Icelandic car rental company offer additional insurance coverage for those who want it. What insurance you will need depends on the type of trip you are planning to undertake, and when you are visiting Iceland.
If you plan on driving in winter, when snowstorms, sandstorms, and strong winds are common, you may want to purchase extra insurance. With icy roads increasing the chance of an accident, and sandstorms occasionally being strong enough to smash windows, consider upgrading to SCDW (Super Collision Damage Waiver) and adding SAAP (Sand and Ash Protection). In both cases, the excess is lowered in the event of damage to the vehicle.
If you are traveling to Iceland in the summer, you will probably not want to miss a journey up to the highlands. The interior of Iceland is only accessible by road between June and September, and you must travel on the highland roads or F roads. These gravel roads are not always well maintained and renting a 4x4 is mandatory if you plan on visiting these areas. Consider purchasing Gravel Protection Insurance for a trip to the highlands. This reduces the excess of any damage caused via gravel to the windshield, headlights, and underside of the vehicle.
There are other extras you can add, such as coverage for an extra driver if you are not traveling alone, Theft Insurance, and add-ons such as a roof box, baby seat, or GPS device. You can see the full list of insurances and extras available with our rentals by visiting this page.
Important Icelandic Driving Laws
It’s a good idea to familiarise yourself with Iceland’s driving laws in detail before arriving, but I’ll discuss a few here. Firstly, headlights must be kept on at all times while driving, day and night. Driving off-road is illegal in Iceland, and if caught violating this the fines are heavy. Also, Iceland has very strict drink-driving laws. The allowed amount is likely much lower than what you are used to in your country, so play it safe and don’t drink at all when driving.
Remember those F roads I mentioned earlier? As we've said already, only 4x4 vehicles are legally permitted to drive on them. This is because of their unpaved surfaces and the requirement of having to cross rivers on many F roads. Only large, powerful vehicles are suited to handle such tasks.
Be Aware of Hazards
All of these extra insurance packages are great and worth purchasing, but better to avoid having to call on them, right? Iceland has a fair few hazards to account for, so as a general rule always drive carefully and stick to the speed limits.
The most obvious hazard is the weather, so ensure that your rental car has winter or studded tires fitted if you are coming to Iceland in the winter. Check weather forecasts on the Icelandic Meteorological Office’s website where weather warnings are posted. Only travel if it is safe to do so; there are areas of Iceland that are very remote, wherein if you do get stuck it will take hours for the rescue service to reach you. Always be prepared for bad weather, because Icelandic weather is famous for its unpredictability.
Most of Iceland’s roads have only two lanes, including Route 1, the ring road. So, be careful if overtaking. Do not stop on the side of the road to take pictures; wait for a designated lay-by or rest area, of which there are many along the ring road. There are many bridges and tunnels around Iceland, some of which are single-lane. Approach these slowly and be considerate of other drivers. Check that the route you are planning to drive is open on Road.is.
And finally, sheep. There are many of them in Iceland, and they occasionally like to wander onto roads. If you come across such a herd, drive slowly and they will pass. Keep an eye out for individuals dashing across randomly.