Do I Need Insurance For My Car Rental in Iceland

When renting a car in Iceland, it's important to understand what insurance is included and what is not. Here we explain Third-Party Liability, Collision Damage Waiver, and more.

What is Third-Party Liability?

When you rent a car, it is important to be aware of third party liability. This is the legal responsibility of the person or company renting the car to third parties who may be injured or harmed by the use of the car. 

In a third-party liability waiver, the company renting the vehicle agrees to accept financial responsibility for damage to property or personal injury. This means that the hirer is not responsible for any costs incurred as a result of an accident.

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

With Icerental4x4, all rentals include Third Party Liability. 

What is Collision Damage Waiver? 

Collision Damage Waiver or CDW is a great way to protect yourself from financial liability in case your hired vehicle has any damages. The CDW comes with an excess which is the maximum amount the renter will pay in case of damage to the vehicle. The cost of this excess is 350.000 ISK. The Collision Damage Waiver is included in all rentals with Icerental4x4. 

What does Collision Damage Waiver cover?

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

What is covered by Collision Damage Waiver

Is there anything that the CDW does not cover?

In Iceland, there are a few things that are never covered by any insurance. These things are easy to avoid happening. Our agents will be more than happy to give you great advice about how to avoid these things from happening. Below you will find a list of what is not covered by CDW or any insurances in Iceland.

  • 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

Can I decline car rental insurance?

If you have insurance with a third party it is no problem at all to decline our insurance. We ask you to contact our customer service team at for more information about declining insurances.

Our Insurance Packages 

Icerental4x4 Insurance packages

Super Collision Damage Waiver (SCDW)

Super Collision Damage Waiver, is additional insurance that lowers the excess(deductible) from the Collision Damage Waiver. This means that the renter will minimise the excess needed to pay in case of damage. With Icerental4x4, the excess goes from 350.000ISK to 110.000ISK (For 4x4 and large vehicles) and 90.000 (Small 2WD vehicles). At the same time, as the risk has been minimised, Icerental4x4 does not require any security deposit to be placed while the rental is active.

Gravel Protection 

Gravel Protection is great 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. The vehicle in front can have a small rock stuck in its tire, when it gets loose it can shoot onto the vehicle behind causing gravel damage.

Sand and Ash Insurance (SAAP)

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

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

Do I need extra insurance in Iceland?

It depends on each person. Iceland is known for its unpredictable conditions, harsh weather and rough roads. So it is really difficult to predict any damages and adding the extra insurance simply means that the driver can cruise around Iceland with peace of mind. Both the gravel and sand damage is something we cannot avoid, and we can save great amounts by having these insurances. 

Iceland is an expensive country. Being an Island located in the North Atlantic Ocean the country is dependent on imports, causing basic products to be more expensive. Cars and car parts are no exception in this case. So fixing damages is typically more expensive compared to the USA or Europe. So selecting insurances to minimise the excess can make a difference at the end of your trip.

Select the best car insurance for your trip to Iceland. 

When it comes to selecting the best car insurance in Iceland it can become confusing to make a choice. As Iceland has more insurances to offer, due to its roads and weather conditions car rentals have more insurances to offer for its customers. We at Icerental4x4 made this simple to select from, by offering three great insurance bundles.

Our recommendation is the Premium insurance package. This bundle includes SCDW, GP, SAAP, all the important insurances that can truly make a difference in case of bad luck and damage.

All rentals are subject to the full rental agreement terms and conditions at the time of the rental. We recommend reading the T&C before renting a car, to avoid any misunderstanding.


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