A Comprehensive Guide To Rental Car Insurance in Iceland
Exploring Iceland by car is an unforgettable experience. The country’s unique landscape, from glaciers and geysers to black sand beaches and volcanic craters, makes it one of the best road trip destinations in the world. To ensure a smooth journey, understanding car rental insurance in Iceland is essential. Here’s everything you need to know to drive confidently and stay protected.
Essentials for Renting a Car in Iceland
Before embarking on your adventure, make sure you meet the basic requirements for renting a car in Iceland. These are:
- Driver’s License: Licenses from EU/EEA countries are valid in Iceland. Non-EU/EEA travelers should carry an International Driving Permit (IDP) in addition to their local license. Note that an IDP must be obtained before leaving your home country. Learn more about IDPs in this blog post.
- Minimum Age: Most rental companies require drivers to be at least 20 years old, but age restrictions vary by vehicle category. Drivers under 25 may incur a young driver fee.
- Credit Card: A valid credit card under the renter’s name is necessary for the deposit and payment. A debit card may be accepted but will incur a higher deposit. Clarify with the rental company in advance.
- Passport or ID: Required for identification at the rental desk. Naturally, the documents must be under the renter and match the name on the credit card.
Mandatory Car Rental Insurance in Iceland
Third-Party Liability Insurance (TPL)
This insurance is required by law and is included in all rental cars in Iceland. It covers:
- Injuries and damages to third parties or their property.
- Legal minimum coverage limits required under Icelandic law.
Third-Party Liability Insurance does not cover damages to the rental car. The driver’s personal liability for accidents is not included either. For this reason, it’s worth looking into purchasing additional coverage.
Optional Car Rental Insurance in Iceland for Added Protection
Iceland’s unique driving conditions call for specialized insurance options to cover various risks.
Gravel Protection (GP)
Driving on Iceland’s gravel roads can lead to significant wear and tear. GP is a type of coverage that you won’t find in most other countries. This additional insurance covers damage to:
- Windshields
- Headlights
- Car body from flying stones or debris
GP will certainly be worth keeping in mind, especially if you’re planning to drive on F-roads.
Sand and Ash Protection (SAAP)
This is another type of coverage that’s unique to Iceland and a handful of other destinations in the world. Sandstorms and volcanic ash can cause extensive damage to the car’s paint and windows.
SAAP is a must if you plan to visit areas like the South Coast or around volcanic zones.
Collision Damage Waiver (CDW)
CDW is a standard inclusion in most rental agreements in Iceland, though not required by law. It limits your financial responsibility for damages to the rental vehicle. CDW usually comes with a deductible (excess). For standard CDW, the deductible can be high and range between €1500 and €3500.
The Super CDW is usually available for an additional cost. This extra policy will lower or eliminate the deductible.
Theft Protection (TP)
Although car theft is rare in Iceland, TP protects you financially if the vehicle is stolen. It typically includes a deductible, similar to CDW.
Tire and Undercarriage Insurance
Iceland’s roads can be harsh on tires and the undercarriage. This add-on covers damage often excluded by standard CDW. Note that it may already be a part of your Super CDW coverage, depending on the rental company.
Personal Accident Insurance (PAI)
PAI covers medical expenses for the driver and passengers in case of injury. Many travelers already have this through their health or travel insurance policies, so be sure to check first for overlaps.
Zero Liability Insurance
This comprehensive package combines CDW, GP, TP, SAAP, and windshield protection, ensuring no financial liability for nearly all damages.
Consider this if you want complete peace of mind.
Road Assistance Insurance
Road Assistance Insurance provides 24/7 roadside support for flat tires, breakdowns, or running out of fuel.
This add-on is particularly helpful given Iceland’s remote roads and unpredictable conditions.
Handling Damage Claims and Accidents
In the event of an incident, follow these steps to manage the situation effectively:
- Document the Scene: Take photos of the damage, road conditions, and surroundings.
- Contact the Rental Company: Inform them immediately to report the incident.
- File a Police Report: Required for serious damages or theft only.
- Review Your Coverage: Check the details of your policy to understand your obligations.
Declining Rental Car Insurance: A Risky Choice
If you have comprehensive travel or credit card insurance, you may consider declining rental company coverage. Before doing so, confirm:
- Your insurance meets Iceland’s legal requirements.
- It includes collision, theft, and third-party liability coverage.
Keep in mind that declining coverage often results in a high security deposit and leaves you financially responsible for uncovered incidents.
Driving under the influence or without proper license will void any insurance, so always adhere to local laws.
Bonus- Unique Challenges of Driving in Iceland
Driving in Iceland presents distinct challenges that make insurance even more important. Here are some considerations:
Harsh Weather Conditions
Weather in Iceland can change rapidly, with strong winds, heavy rain, or snow. Ensure you’re adequately insured for weather-related incidents.
F-Roads (Mountain Roads)
These highland roads are only accessible with 4×4 vehicles and are known for their rough terrain. Some rental agreements prohibit driving on F-Roads without prior approval.
Check your coverage if you plan to explore these areas.
River Crossings
Crossing rivers is common on some routes. However, most insurance policies do not cover water damage, so proceed with caution.
Driving Off-Road
Driving off designated roads, including unmarked trails, is prohibited and not covered by insurance.
Stick to official routes to avoid invalidating your coverage.
Book with Rentalmoose in Iceland
Book your rental car with Rentalmoose! We have access to trusted suppliers across Iceland, as well as over 15,000 locations globally. Rentalmoose commits to sustainability—we plant a tree for every booking made.
Safe travels on the Icelandic roads!
