A Guide To Iceland Car Rental Insurance

A Guide To Iceland Car Rental Insurance

Daniel Cramer
(Updated: )
10 min read

Driving in Iceland offers a rare opportunity to explore stunning natural landscapes, but it also comes with unique challenges such as harsh weather conditions, gravel F-roads, and remote areas where assistance might be far away.

Proper rental insurance is essential to ensure that your Icelandic adventure remains stress-free and that you are protected against potential unexpected costs.

Here in Iceland, there are normally 2 basic insurances: Collision Damage Waiver and Third Party Liability.

Sometimes, the Third Party Liability will be bundled under the 'Collision Damage Waiver' in the terms.

Also check out or 10 most common mistakes when renting a Car in Iceland.

Summary

  • When renting a car in Iceland, there are two main types of insurance offered: Collision Damage Waiver (CDW) and Third Party Liability (TPL).
  • TPL is a legal requirement and is typically included for free.
  • CDW waives the rental company's right to hold you fully liable for damages to the rental car.
  • A Super CDW upgrade can lower the self-risk amount you are liable for.
  • "Gravel Protection" is also recommended for most roads in Iceland due to the presence of loose gravel.
  • Make sure to study the rentals terms carefully for specific details and exclusions.

Summary Table of Insurance Options

Insurance Type Coverage Recommended For
CDW / SCDW Collision damage to rental car All travelers
Gravel Protection (GP) Damage from gravel to body/windshield Travelers on gravel or rural roads
Sand and Ash Protection (SAAP) Damage from sandstorms/ash South Coast and windy areas
Theft Protection (TP) Theft of vehicle or damages during theft Urban areas, overnight parking
Additional Driver Coverage Extends liability to multiple drivers Groups with more than one driver

What is Third-Party Liability?

Third-Party Liability or TPL is, in essence, protection from the claims of someone else (a third party). It covers any damage that you might cause to another person, vehicle or property while cruising around in your rental car. It also covers the passengers in your car in case they suffer damage or injuries.

In Iceland, Third Party Liability Insurance is a legal requirement and is normally included for free. If a car rental attempts to offer it as optional insurance for an added cost to you, then consider that a warning sign.

Image of Collision Damage Waiver and Third Party Liability from Northbound Car Rental Site


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What is a Collision Damage Waiver?

CDW, or Collision Damage Waiver, refers to the car rental company waiving its right to consider you fully liable for the damages to the rental car while you have it. The insurance covers most of the damage leaving you with a set self-risk amount that you are liable for. This amount can vary immensely between car rentals but is usually somewhere around 2.000 EUR.

Image showing Collision Damage Waiver included with our rentals

Image showing Super Collision Damage Waiver SCDW and a price tag with an Add button

The amount can normally be substantially lowered with a Super CDW upgrade.

Often, the Collision Damage Waiver won't cover the vehicle for water damage, undercarriage, tires, headlights, windscreen, wind damage to the doors or negligence and is obviously void if you are found to be driving whilst intoxicated. However, this can vary depending on the agency. So, make sure you study the car rental's terms carefully.

Estimated Damage Costs

Tire Damage

  • Cost: ISK 20,000 - 50,000 (about $150 - $370 USD)
  • Details: Gravel roads can puncture or severely wear out tires.

Wind Damage to Doors

  • Cost: ISK 200,000 - 600,000 (about $1,400 - $4,300 USD)
  • Details: Wind can cause damage, such as when doors are blown open.

For our Extensive & Definitive Guide to Renting a Car in Iceland click here.

Rental car in Iceland

Super Collision Damage Waiver

The Super Collision Damage Waiver is an advancement of the 'Collision Damage Waiver' and significantly lowers the self-risk amount (the sum you could pay up to if the vehicle is damaged).

Iceland has a high risk of sustaining damages to vehicles due to road conditions and weather conditions. So, it is always best to anticipate the worst-case scenario if you can. This will help to prevent even higher expenses if any damage was to occur.

Recommendation:

For most travelers, upgrading to SCDW is highly recommended, as it minimizes financial risk and provides greater peace of mind, especially if you're not accustomed to Iceland's road conditions.

Related Posts:

Gravel Protection

The second 'must' insurance is 'Gravel Protection'. Most of you may be under the impression that this is only required for those heading to F-roads. However, that is slightly inaccurate.

Image of Gravel Protection banner with the price per day and an Add button

Most roads here in Iceland do contain a lot of loose gravel. Due to the bad weather and frequent use of studded tires, the roads tear up at a fast pace leaving loose gravel scattered everywhere. Many travelers face unexpected expenses from chipped windshields on gravel roads. GP can significantly reduce or eliminate these costs.

The tires can cause the gravel to shoot up and cause all sorts of damage. In many cases, it can be from the car in front of you or trucks coming from the opposite direction.

Recommendation:

Gravel Protection is essential if you plan on driving on Iceland's rural roads, where loose gravel is common. Even on paved roads, gravel can easily be kicked up, making GP a worthwhile addition.

Read More: - Do I Need Gravel Protection In Iceland? Whilst the number of gravel damage incidents is fairly low compared to the number of tourists, it still does happen quite frequently and that's why I highly recommend the Gravel Protection.

Estimated Damage Costs

Windshield Chips and Cracks

  • Cost: ISK 40,000 - 100,000 (about $290 - $650 USD)
  • Details: Small chips might be fixable, but larger cracks usually need a full replacement.

Gravel Damage to Paint and Body

  • Cost: ISK 25,000 - 75,000 (about $180 - $550 USD)
  • Details: Gravel can cause scratches, dents, and damage to the undercarriage.

These costs are an estimate and can fluctuate and change due to severity and other factors.

Sand and Ash Protection

You may have also heard about 'Sand and Ash Protection'. Now, this is more of a 'just in case' insurance. It is only really required from April to June since, from the winter, the grass has yet to grow enough to keep the sand in place.

Image of the banner for Sand and ash protection showing a price tag per day and an Add Button

I would recommend this insurance if you plan on heading down the south coast, as there are several vast sand fields you will be driving through.

Recommendation:

If you're planning to visit Iceland's South Coast or any area prone to high winds and sand, SAAP is highly recommended. These storms can come on suddenly, and the damage they cause can be significant.

Read More: - Do I Need Sand and Ash Protection In Iceland?

F-roads and Water Damage

As previously mentioned, the vehicle usually isn't covered against water damage. So if you are planning on driving an F-road that contains a river, you will need to drive with care and assess the risk before driving through the river.

It's also important to note that most, if not all, car rentals in Iceland forbid you from driving on F-roads unless you're renting a 4x4 vehicle specifically marked as permitted for F-roads.

Some agencies do offer additional insurance that covers damage caused to the vehicle from crossing rivers, such as this 'River Ford Crossing Protection' pictured below:

Image of a banner for River Crossing Protection that lowers the self risk and covers damages done to vehicle while crossing rivers

Estimated Damage Costs

Undercarriage Damage

  • Cost: ISK 50,000 - 150,000 (about $370 - $1,100 USD)
  • Details: Rocks and uneven terrain can damage the undercarriage.

Driving on F-Roads Without a 4x4

  • Cost: ISK 500,000 - 800,000 (about $3,600 - $5,800 USD)
  • Details: If you drive on F-roads without a 4x4, insurance won't cover damages.

These costs are an estimate and can fluctuate and change due to severity and other factors.

What Is Self-Risk?

The 'Self-Risk' can be a bit confusing for some people at first as some may know it as 'deductible' or 'excess'. It is essentially the maximum amount you would be liable for the damages that this insurance covers.

Image of Suv 4wd 4x4 iceland rental cars driving in harsh weather conditions

Each insurance has its own self-risk amount. Some can be high amounts, whilst others can be 0. As previously mentioned, you can purchase additional insurances such as the 'Super Collision Damage Waiver' which usually significantly lowers the self-risk amount.

It's worth noting that it may also be possible to purchase an 'Insurance Bundle' that has a 0 self-risk. Meaning, if damage occurs, you would not pay a penny. These bundles are often called things like Premium Collision Damage Waiver, Platinum Insurance Bundle or Gold CDW.

However, it still doesn't usually cover certain damages like water damage and undercarriage damage. Be sure to check the terms, or contact the supplier to make sure.


Insurance Information Page


Frequently Asked Questions (FAQ)

What are the basic insurances when renting a car in Iceland?

The two basic insurances typically offered are Collision Damage Waiver (CDW) and Third Party Liability (TPL). TPL is usually included for free as it's a legal requirement in Iceland. CDW limits your financial liability for damages to the rental car.

What does Third Party Liability (TPL) cover?

TPL covers damages that you may cause to another person, vehicle, or property while driving the rental car. It also covers passengers in your car in case they suffer injuries or damages. In Iceland, this insurance is a legal requirement and is usually included in the rental cost.

What is Collision Damage Waiver (CDW)?

CDW limits your financial liability for damages to the rental car. It covers most types of damage, but there are exceptions like water damage, undercarriage, and tires. Always read the rental terms carefully to understand what is and isn't covered.

What is Super Collision Damage Waiver (SCDW)?

SCDW is an upgraded version of CDW that further lowers your self-risk amount. This is particularly useful in Iceland due to the country's challenging road and weather conditions.

What is Gravel Protection?

Gravel Protection is an additional insurance that covers damages caused by loose gravel on the roads. This is recommended for most roads in Iceland, not just F-roads.

Are there any additional insurances for driving on F-roads?

Some agencies offer additional insurance that covers damages caused while crossing rivers on F-roads. However, most car rentals forbid driving on F-roads unless you're renting a 4x4 vehicle specifically marked as permitted for such roads.


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