Iceland Car Rental Guide

All cars in Iceland are legally required to be insured. Car rentals should always come with very basic insurance included, and the option of upgrading for added coverage. Some of the coverage makes more sense than others, and we will try to separate the wheat from the chaff below.

Note: We guarantee that the car rentals we partner with will have this basic insurance, but of course, we can’t vouch for every car rental in Iceland. If someone was trying to rent you an uninsured car, though, I’m pretty sure that would be illegal.

Make sure you read our guide for driving in Iceland before you get behind the wheel!

All rental cars usually come equipped with what’s called a CDW – Collision Damage Waiver. This is some very basic insurance which varies from agency to agency but generally has a fairly high deductible. This means that if the car gets wrecked or damaged, you have to pay for the first … usually several thousand dollars, and after that, it’s covered, so you don’t have to pay the whole thing.

In addition to the CDW, most agencies have several potential add-ons.

SCDW – Super Collision Damage Waiver

Not a boring superhero, the SCDW usually brings your deductible (the amount you have to pay yourself) significantly down. Often by like 70%.

• Please note, SCDW often doesn’t cover chassis damage, such as a large rock hitting the underside of your car. Ask about this. Some agencies might have additional chassis insurance too.

Windshield/gravel insurance

There are a number of different versions of this. It is basically for small nicks and scratches that will never be as high as your deductible but can still be considerable amounts, such as paint scratches, dings and windshield scratches. Can be highly advisable since a considerable part of the countryside road system consists of gravel roads.

Sand and ash insurance

If you’re going to the highlands, you may be advised or required to get sand insurance. This is because the desert highlands sometimes get sandstorms that can scratch or strip the paint off your car, and the rental companies are not fond of that. Ash insurance sounds like a bit of a joke to me, but I guess you might be grateful for it if a volcano erupted nearby. In any case, they are usually lumped together.

Theft insurance

You might have heard that crime is almost unheard of in Iceland. And it is. It’s unlikely though not impossible, and you would be happy you had this if something happened. You might be covered for theft by your travel insurance, though. In any case, this is often lumped in with other things in a package so it doesn’t hurt to have.

Multi- Insurance packages

Many agencies have packages with more than one thing (say, SCDW, Gravel protection and sand & ash) for a much lower price. This can be a great deal so look out for these.

Some credit cards cover you really well. That’s for you to find out about. Often, they will cover your deductible* as long as you paid the whole rental with the credit card and don’t buy any additional insurance.

*What this means: let’s say a car is badly damaged. The deductible is $2.500 USD, but the damage is $10.000. This means the customer pays 2.500, the insurance pays the rest. But if they paid with some major credit cards, the card company will cover the $2.500. Prepare for your trip by finding out about your credit card coverage!

Call 112, the emergency services.

If you’ve had a minor accident by, say, hitting a pothole on the Icelandic highway, you can also fill out a report without calling the emergency services.