Iceland Car Rental Insurances: The Ultimate Guide in 2024

Ensure you are covered for any possible damage to your rental car in Iceland. In this article, we will go over each type of insurance you can get when renting a car and explain every single one.

We all know the feeling when it comes to renting a car, looking at all the insurance options available, and getting that nervous feeling. Car rental insurances always seem complicated, but we at Icerental4x4 want to change that. If you are struggling to figure out what type of insurance you should have for your trip to Iceland or are thinking about what is worth it and what is not, you have come to the right place. In this guide, we will go over each insurance you can find for your rental in Iceland and explain them step by step. 

There are typically two insurances that come included with your rental in Iceland. It is the Collision Damage Waiver and Third-Party Liability. It is often also spoken about them as CDW and TPL. 

You will also find other individual insurances in Iceland that you might not see in other countries. That is Gravel Protection and Sand and Ash Insurance. These protections can be vital in Iceland, as the country is unique in many ways. 

Third-Party Liability 

A third-party liability waiver does not always mean that you walk away without paying anything in the event of an accident. For example, suppose the company renting the vehicle believes you were negligent while using the car. In that case, they can still sue you for damages (even if they have agreed to take responsibility). In cases where third-party liability insurance has been taken out, it usually covers medical expenses and damage to property other than the rental car itself. A third-party liability waiver does not usually cover damage to your vehicle if you are being driven by someone else unless this is stated explicitly in the waiver.

Collision Damage Waiver

Suppose you have an accident with your rental vehicle. In that case, the Collision Damage Waiver will cover the repair cost of the car's bodywork. CDW covers the bodywork of the vehicle. In case of collision, the bodywork is typically damaged. If any dents or scratches happen to the car's body, there will be a maximum amount to be paid. This amount is called excess self-risk. If the repair cost is under the self-risk, you will only pay for the amount it costs to fix the vehicle. If the price is over the self-risk,you will only pay for the self-risk, and the car rental company is liable for the difference. 

Collision Damage Waiver coverage

It is essential to know that when it comes to the CDW in Iceland, it will not cover all types of damages. What is it that is not included? It is the following: 

  • Damage caused by animals
  • Driving while intoxicated
  • Damages to the chassis of vehicle and undercarriage of the vehicle
  • Damages to tires/wheels
  • Water damage to the vehicle
  • Damages to the door structure (frame, hinges, etc.) caused by wind gusts

Theft Protection

Iceland is known for being one of the most peaceful countries globally. However, dishonest people will always exist, so if your car were to be stolen, you would never pay anything. for the loss of your vehicle. Please note that this does not ensure missing items or other things inside the car. It will not include personal belongings. 

Gravel Protection 

Gravel Protection is excellent insurance that can be vital while driving around Iceland. With GP, you cover the front windscreen, headlights, fog lights, and front of the car for any chips/cracks caused by rocks shooting at the vehicle. This type of damage does not only happen while on gravel roads. For example, the car in front can have a small stone stuck in its tire. It can shoot onto the vehicle behind, causing gravel damage when it gets loose. 

Sand and Ash Protection

Sand and Ash insurance covers the vehicle's bodywork in case of a sand or ash storm. In a sandstorm, what can happen is that the painting of the vehicle gets ruined. It means that the whole car might even need to be painted. With the SAAP, the renter minimizes its risk in a sand storm. The sand storms can happen on windy days in the highlands and while driving on Iceland's south coast. As the coast has long sand beaches, the wind can be trouble, and at the same time, it can be hard to predict this type of damage. 

Vehicle from a sand storm in Iceland

The weather conditions in Iceland can be extreme, with winds going up to 30-40mph or 45-60km/h. It can result in the loose gravel blowing with the wind, causing damage to the vehicle's painting. 

Super Collision Damage Waiver

The Super Collision Damage Waiver or SCDW is additional protection to the standard Collision Damage Waiver. The SCDW limits your financial liability to a minimum in case of a collision or damage to the vehicle. So in simple words, if the damage happened to the rented vehicle, you would pay less than the excess CDW. For Icerental4x4, you would then pay 110.000 ISK instead of the 350.000 ISK that comes with the standard Collision Damage Waiver. 

To simplify, we at Icerental4x4 created three insurance bundles where you will have these additional insurances included. These three bundles come in different stages, each with its inclusions. Here you will find a summary of these bundles. 

Silver Package

Silver Package is a bundle where you will get the Super Collision Damage Waiver and Gravel Protection on top of the CDW, TPL, and TP that come included in the price. It means that your financial liability in a collision has been minimized. In addition, you will be protected from gravel damage to the windscreen, headlights, foglights, and the front part of the vehicle. 

Recommendation: If you are planning a short trip to Reykjavík and its surroundings, having Silver Package is highly recommended. 

Premium Package

Premium Package is a bundle with all the insurances in one package. That means you will get the Super Collision Damage Waiver, Gravel Protection, and Sand & Ash Insurance on top of the CDW, TPL, and TP. As a result, your financial liability has been reduced in case of a collision, gravel damage, and sand or ash damage to the vehicle. 

Recommendations: If you plan a trip to the highlands or the south coast of Iceland, having Premium Package can be a great benefit. Limiting your financial liability against various damages can have a considerable impact at the end of the rental. 

Platinum Package

Platinum Package is essentially the same as Premium Package. However, instead of limiting your financial liability, you will reduce the liability down to 0. That means that in case of any collision, gravel damage, or sand & ash damage, your self-risk will be 0. 

Recommendation: The Platinum Package is essential for those who want a risk-free package. With 0 self-risk, your liability has gone down to the complete minimum. 

Icerental4x4 car rental insurance packages

What car rental insurances are included in the rental price in Iceland?

When you rent a car in Iceland, you will have Collision Damage Waiver and Third-Party Liability included in the price. In addition, many rental companies also include Theft Protection with the CDW and TPL. 

What is a self-risk 

Self-risk can also be known as an excess or deductible. Self-risk is the amount the driver might need to pay in case of damage. When you have a self-risk with insurance, you will only be charged up to the amount of this self-risk. The car rental company will cover the difference if the damage cost exceeds the self-risk. 

In simple words, when renting a car in Iceland, the self-risk is around 350.000 ISK. However, suppose the vehicle is completely damaged due to a collision. In that case, the driver is only liable for the amount of 350.000 ISK. 

What is not covered in Iceland car rental insurance?

Iceland is unique, with narrow roads, many gravel roads, single-lane bridges, and rough roads in the country's fjords. Due to this, some types of damage are not covered in Iceland. However, here is a list of the things that are good to be aware of: 

  • Damage caused by animals
  • Driving while intoxicated
  • Damages to the chassis of the vehicle and undercarriage of the vehicle
  • Damages to tires/wheels
  • Water damages to the vehicle
  • Damages to the door structure (frame, hinges, etc.) caused by wind gusts

You can also read the complete list of what is not covered by car rental insurance in Iceland. You can always contact our customer service agents for more information if you have any questions. 

What car rental insurance do I need for my trip to Iceland?

When selecting the rental insurance for your trip to Iceland, it can vary from where you will drive and what you will do. In this case, we have created three scenarios that hopefully provide more insight into what is needed and when. 

A trip around Reykjavík and its surroundings. 

If you are planning a short trip, staying in Reykjavík and driving the Golden Circle to the Blue Lagoon and Snæfellsnes peninsula, having the Silver Protection will be sufficient. With this, you have limited the financial liability in case of collision and gravel damage that might happen (Even if it's not the driver's responsibility)

South Coast, ring road, and highlands. 

Suppose you plan a trip to the south coast, ring road, or the highlands. We strongly recommend getting Premium Protection. You can experience strong winds on the south coast as you have over 200km of sand in the area. So by opting for the Premium, you will have limited your financial liability in case of sand damage and collision or gravel damage that can also happen on the highlands

Ultimate Iceland holiday 

Suppose you are planning your dream holiday to Iceland and are looking for a carefree trip. In that case, we recommend opting for Platinum Protection. With this, you have reduced the financial liability to zero in the possibility of damages. We all know anything can happen on the road, and we can never predict damage to vehicles. So having Platinum Protection will give you that carefree car rental experience. 

Kirkjufell in Iceland

How much does Car Rental insurance cost in Iceland?

Car rental insurance prices can vary between rental companies. However, depending on the package, it is typically from 15 to 40 USD daily. For example, at Icerental4x4, the prices are as follows: 

Silver Package: 2300 ISK per day for 2WD. 2600 ISK per day for 4x4 and passenger vans (Roughly 17-19 USD per day) 

Premium Package: 3300 ISK per day for 2WD. 3600 ISK per day for 4x4 and passenger vans (Roughly 24-26 USD per day) 

Platinum Package: 4900 ISK per day for 2WD. 5600 ISK per day for 4x4 and passenger vans (Roughly 35-40 USD per day). 

Can I decline CDW when renting a car in Iceland?

Yes, you can decline the CDW with most of the car rentals in Iceland. If you need to drop the CDW, you will be required to leave a security deposit while the rental period is active. Suppose you have insurance through your credit card company. In that case, you must consider what is necessary so the insurance is involved. It is also essential to ensure that your card company will provide insurance for the vehicle rented. Some may only insure 2WD drive vehicles but not 4x4, for example. 

If you need to decline the CDW, inform the agents when you pick up the vehicle, and they will remove it from the booking. 

What is the best car rental insurance in Iceland?

Platinum Package is the best insurance for your rental car in Iceland. It provides zero self-risk and gives you a carefree holiday in Iceland. 

Woman standing by a roof tent in Iceland

Stay safe on the road in Iceland. 

When renting a car in Iceland, your safety is important to us. It is essential to be prepared for Iceland and be aware of the dangers and weather conditions you might travel in. Two websites play a crucial role for everybody visiting Iceland.

Safe Travel is a platform where you can be informed of any warnings in Iceland, weather, earthquakes, or even volcanoes. 

Vedurstofa Íslands is the webpage where you can look into the weather forecast. You can also see the forecast for the northern lights on this page. 

Travel around Iceland with Icerental4x4

Suppose you have questions about your car rental in Iceland or insurance. In that case, you can always contact us here at Icerental4x4. Our team of experts is here to help and can answer all your questions about Iceland and car rentals in Iceland. For more Icelandic information, you can also find us on social media, such as Facebook, Twitter, Instagram, or Youtube. 

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