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All About Iceland Car Rental Insurance

Updated: Nov 4, 2019



Planning your Iceland road trip is a big part of the fun. Choosing where you will travel in the country, what sights to see and what time of year to go are all exciting decisions. As is selecting the best car rental for your adventure. There is another important, but slightly less enthralling decision to make though. That being what level of car insurance cover to get. It may not be at the top of your list of things to research and consider. None the less it is important and you must! Vehicle insurance coverage in Iceland is actually quite a big deal. After all it is probably not that often that you drive in a country with active volcanoes and quite such extreme weather conditions. But gravel, volcanic sand and ash insurance in Iceland is a thing.


Car rental companies in Iceland work with their insurance company of choice to offer a range of options. In this article we take you through the ins and outs of car insurance in Iceland. We also look at the different situations driving in Iceland might present you with. What the most common hazards are and how to avoid them. Accidents do happen, but if you are aware of the potentials, you could avoid many common mishaps.


Do I need car rental insurance in Iceland?


Yes, absolutely. All rental vehicles in Iceland must be covered by some form of insurance. You may already have some insurance cover linked to your credit card. Often though this is a basic car hire excess insurance. So you should consult your bank and read the terms and conditions to check exactly what you will be covered for. As we said, driving in Iceland throws up some very particular conditions and potential hazards.


CDW Insurance in iceland


All rental cars in Iceland come with some manner of basic rental insurance and third party liability. This is called a Collision Damage Waver and does vary a little. It generally means that you will be liable for payment of damages up to a certain level. So that will be any minor scratches and bigger damages up to what is usually a fairly high price bar. After a certain figure is crossed you won’t have to pay any more. It is usually well worth adding some of the optional extras to this basic protection. You will pay a little more up front but you will likely be very pleased that you did.


Gravel Protection Insurance in Iceland


Many of Iceland’s roads are paved, but there are also a considerable number of gravel roads throughout the country. Stony parking areas and small pebbles on asphalt roads can all lead to scratches and chinks in your vehicle’s paintwork. This type of damage will not be covered by your basic rental insurance cover but can quickly add up to quite a hefty bill. You might think you do not need it if you are driving on the more established paved routes, like the ring road or the Golden Circle. However, nearly all of the attractions and beauty spots in Iceland involve turning off of the main road onto a gravel road. Therefore, if you are driving anywhere outside of the capital it is a very good idea to get this extra cover.


Sand and Ash Insurance in iceland


SAAP cover. This one may sound like a typical car insurance upsell, but things can and do get quite extreme in Iceland. If you are travelling in the highlands or the South Coast of Iceland it is very possible that a sandstorm might blow through. It is not an every day occurrence by any means, but they can happen suddenly and sometimes with great force. Iceland’s volcanic landscapes include many desert areas and black sand beaches around the coast. With few trees for protection and frequent storms, the winds can really get up and sand blast everything in their path. A sandstorm will wreak havoc on a vehicle’s paintwork and without a policy to cover damages of this type then you will be liable.


Super Collision Damage Waiver


This is a form of extra cover that significantly lowers the amount that you pay out if you are involved in a collision. It is an upgraded version of the CDW insurance and It can be a good option if it is combined with gravel protection for example.


Other hazards to be aware of and how to minimise risk


Exploring Iceland by campervan is always exciting and experiencing the more extreme conditions is all part of the adventure. Hopefully you will never have to call on your insurance in Iceland. So here follows some advice on how to avoid any unnecessary mishaps.

River Crossings – There are a few roads in Iceland that include river or ford crossings. Sometimes water levels are very low and crossing them might seem easy. But be warned that camper and car rental company insurance never cover your vehicle for damages caused by river crossings.


Strong winds – With its open landscapes and stormy weather there are often some very strong winds in Iceland. It is a good idea to bookmark the Icelandic Meteorology Office website and heed any storm warnings that come in. You may sometimes be advised not to drive if the winds are dangerously strong. It is always important to be aware of the wind though. One of the most common damages to rental cars in Iceland is to the doors being whipped open by the wind. Always take note of which way the wind is blowing and open your vehicle door with due caution.


Winter driving in snow and ice – If you are exploring Iceland in winter then you need to take extra care on the roads. Always check the weather before you travel and alter your plans accordingly. If you are driving in winter, especially if you are tackling any mountain passes definitely consider hiring a 4x4 vehicle. Being a confident driver and knowing how to deal with ice will stand you in good stead.


Wandering sheep – Many of the roads in Iceland are open to the surrounding landscapes. This means that the hundreds of free grazing sheep wander onto and across the roads quite frequently. Be aware of any white dots in the distance and regulate your speed if you spot any. Aside from having the death of a sheep on your conscience, you could also damage your car or hurt yourself and your passengers in the process.




Tyre damage – Iceland’s many gravel roads can be hard on car and camper tyres. It is really easy to damage your tyres so it is always a good idea to check them thoroughly before you set out again on a long drive. It is much easier to change a tyre in a parking area or campground than out on the road away from any assistance or services.


We hope that we have answered all of your questions around what car rental insurance you need in Iceland? Just get in touch if you would like any further information. Safe travels and enjoy the ride!

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