You’ve probably heard the rumors, and they’re all true. Driving in Iceland is unlike driving anywhere else in the world. Between unpaved, gravel roads to snowy, icy conditions and black ice, there’s a lot to be prepared for. You might have already imagined some of the obstacles that you face. But did you know that in addition to snowstorms, hail storms, and wind storms, Iceland also gets sandstorms and ash storms? This combination of extreme weather elements means you need to protect your car, camper, or motorhome rental with insurance. Many people consider car rental insurance to be an upsell that the rental companies use to squeeze extra money out of their clients. That’s definitely not the case here in Iceland. In fact, it’s mandated by law that car rental companies provide CDW insurance to all rentals. Let’s get into the nitty-gritty details of which coverage you need, and why.

Weather in Iceland

The weather in Iceland plays a significant role in the different types of insurance available. Because there are many types of severe weather in Iceland, consequently, there are several different kinds of insurance. In addition to the snow, sleet, and hail creating hazardous driving conditions, there are also really high winds. And something many people do not know is that we also have sandstorms in Iceland. It’s not just for the desert! Our tiny volcanic island has been blessed with black sand beaches and other remnants of the fiery giants. But it also means that there’s a lot of volcanic ash and sand floating around. Sometimes it gets whipped into a frenzy by fierce winds and result is a car covered in a thick layer of grainy particles that become nearly impossible to remove. Combining wet conditions, sand and ash, and freezing temperatures will surely spell disaster for your rental.  

Do I Really Need Rental Insurance in Iceland?

In a word, yes. The question is which type of insurance is best for you. When considering the kind of rental insurance to get, I want to encourage you to go in with an open mind. By this, I mean that you could be the world’s best driver, practice extreme caution and yet, still have problems. Even if you’ve never had an accident before, conditions are different here. And many elements are out of your control. Anything from low visibility to a sudden windstorm to other drivers on the road. These factors have absolutely nothing to do with your skill or ability behind the wheel. So please keep that in mind.

Types of Car Rental Insurance

Alright, let’s dig into the different kinds of car rental insurance in Iceland. There are what the companies offer to protect you from all things we’ve talked about. Here are the types and what they cover. When comparison shopping, be sure to factor in what’s included in the cost of your rental. Not all rental companies are created equal. Some will already incorporate the cost of these essential types of insurance into the quote they give you. Make sure you know exactly what you’re getting (and not getting) before you book.

Super Collision Damage Waiver (SCDW Insurance)

This type of insurance takes the mandatory Collision Damage Waiver (CDW insurance) and builds upon it. It essentially means you have less of a liability than you would with regular CDW insurance. SCDW and CDW were created to account for the fact that driving conditions in Iceland are extremely unpredictable. Accidents happen due to lack of visibility on snowy or foggy days, cars and motorhomes skidding on black ice and snowy, frozen roads, or drivers simply getting distracted for one reason or another. While these two types of collision insurance don’t relieve you completely of any damage your vehicle sustains, they do greatly reduce the portion of the repair that you are financially responsible for. If you’re worried about protecting your car in general, this is a good option for you.

Check with your rental company about specific policies for the make and model of your vehicle. Your deductible for a crash, impact, or any other damage will vary according to your rental.

Gravel Protection (GP Insurance)

I think Gravel Protection (GP insurance) along with Sand and Ash Protection (SAAP insurance) are the two types of insurance that people are the least familiar with. This makes sense because you may have never of them before. But planning a road trip in Iceland will definitely change that. Let me break it down for you and explain what they are, what they cover, and more importantly, what they don’t cover.

To understand Gravel Protection (GP), you have to understand a crucial thing about driving in Iceland. Many of our roads, even stretches of our principal highway, the Ring Road, are unpaved, gravel roads. The country’s F-roads (mountain roads) also tend to be unpaved. So what does that mean for you as a driver? Well, depending on your speed, you’re going to be kicking up a lot of gravel and dirt. Those little pebbles can do quite a bit of damage to the body of your car, camper, or motorhome. GP insurance protects you from light scratches and dents on the vehicle’s exterior. This includes the windshield, headlights, and body of the vehicle, even if the gravel is splashed onto your car by passersby or oncoming traffic.

Please keep in mind that this type of insurance does NOT include damage to tires or the underside of the vehicle. If you follow the speed limits though, this should not be a problem. It’s only the people who drive too fast on gravel roads who cause serious damage to their vehicle. More than 50% of Iceland’s roads are gravel, so GP is a must for your travels.

Sand & Ash Protection (SAAP Insurance)

This type of insurance will probably be new to you as it is unique to Iceland. The sand and volcanic ash blowing around the island can wreak havoc on your car rental. This is especially true in parts of the country where there has been a flurry of volcanic activity in the past decade. Remember the eruption of Eyjafjallajökull in 2010? It gets even worse when there is an actual sandstorm or ash storm. Yes, those are real, and they happen in Iceland. High winds and dry weather work together to produce a destructive cocktail. Your car rental, and consequently, your bank account, will pay the price. Add snow and ice into the mix, and you’ve got a recipe for disaster. You can significantly reduce your liability by getting SAAP insurance.

South Iceland, in particular, is known for volcanic sand and ash storms. If you are traveling along the southern part of Iceland’s Ring Road, I highly recommend you get sand and ash protection, regardless of the time of year.

Lastly, there’s no type of insurance that protects against damage from hail. My best advice would be to constantly check the weather forecast (which you should already do anyway) and avoid driving in any kind of storm.

Theft Protection (TP)

So, this one is the only type of insurance that I would consider optional. Theft in Iceland and crime overall are very low. While the occasional theft of a bag, wallet, or purse does happen (albeit very rarely), most Icelanders aren’t sitting around plotting how they are going to steal a car, rental or otherwise. We’re too busy living our happy, crime-free lives. Car rental companies know this, which is why you’ll almost always see this type of insurance already included or offered for free. Not only that, but the liability is zero if your vehicle does get stolen. That’s how little the rental companies worry about theft. If it does happen to you, you will be 100% covered with theft protection (TP insurance).

Driving in Iceland: Do I Really Need Insurance?

I hope I’ve laid out for you why it’s imperative to get insurance coverage for your rental in Iceland. You need to be prepared for what to expect in this beautiful yet sometimes harsh, unforgiving land. As the old saying goes, “better safe than sorry” and it’s 100% when it comes to protecting your car, campervan or motorhome rental here. I know that when I travel, I never get the insurance. I just think “Nah, it will be fine”. Thus far, knock on wood, I’ve never had any problems. But as you know, Iceland is different, and I ask you to think about doing things differently here. If you can, look for a car hire company that already offers most if not all of these types of insurance rolled into the cost of your rental. Save yourself the trouble and give yourself peace of mind.