Renting a car, campervan or motorhome and driving around Iceland’s Ring Road is the perfect way to see the country. You can go at your own pace and explore places like Vatnajökull National Park or the Diamond Circle. When you pick up your rental at Keflavík airport or at the rental desk in town, they’ll ask you the inevitable question: Would like to add on extra insurance protection? At which point you’ll likely slam the keys down on the counter and scream “No! You’re just trying to upsell me!” while breathing heavily. Just kidding, we live in a civilized society, so you’ll probably just politely decline because you know better. But not so fast my friend. I’m here to tell you that yes, you actually need that car rental insurance when driving in Iceland.

Driving in Iceland

I’m sure you’ve heard that our small, Nordic island is different. Everything from some of our more unusual foods (hello boiled sheep’s head, I’m looking at you) to our Viking past to the weather. Ah yes, the glorious Icelandic weather. Iceland is a rugged land of places like Eyjafjallajökull volcano and Snaefellsjökull glacier, so you know we’ve got a few tricks up our sleeve when it comes to our climate and inclement weather. Well, perhaps inclement weather is a bit of an understatement. I think sudden ash storms, occasional hurricane force winds and flying gravel paint a more accurate picture. All of this makes driving in Iceland a bit more challenging than anywhere you’re used to. And here you were all along thinking that the worst thing you’d have to deal with was some snow on the road and a little bit of black ice. That’s kid’s stuff.

So this is where car insurance comes in. There’s a reason the government made CDW (Collision Damage Waiver) insurance mandatory on all car rentals. And it has nothing to do with making the car rental companies rich. They know that a bunch of tourists slipping and sliding all over the road never ends well. There are several types of insurance for car, camper, and motorhome rentals. I’ll go into each type below in detail. See which ones you think are best for your trip. I personally recommend getting all of them, but that’s just me. I prefer not to owe lots of money to the insurance company because some other driver flung gravel onto my windshield as I made my way from Vik to the Jókulsárlón glacier lagoon or because I got caught in some freak sandstorm of volcanic ash in South Iceland. Yes, both of these things happen.

Types of Insurance Protection for Your Vehicle in Iceland

There are four main types of auto insurance for renters driving in Iceland. These are their names and what they cover.

CDW and SCDW Insurance

I put these under the same category because they are essentially variations on the same theme. Collision Damage Waiver (CDW) and Super Collision Damage Waiver (SCDW) protect you if God forbid, you have an accident. Crashes happen, especially in a place that has slippery roads. Given that Iceland is covered with snow most of the year, you’ll always find slick conditions, even on the Ring Road. Your deductible is reduced depending on which types of insurance you have. SCDW insurance provides more coverage and therefore a lower deductible that CDW insurance. Some companies offer platinum packages that not only combine the different types of insurance but may also lower your deductible to zero. Ask your car rental provider about the options available.

GP Insurance

Gravel Protection (GP) is exactly what it sounds like. It protects you against damage inflicted by gravel. While the Ring Road is mostly paved, there are some sections that are unpaved. F-Roads (mountain roads) are completely unpaved. This can cause damage not only to the underside of your transport and its wheels, but also to the body and windshield of your vehicle. It’s not unheard of to have oncoming SUVs or large trucks that are traveling just a little too fast kick up pebbles and send them flying in your direction. One of the main reasons people turn down rental insurance is that they know they are good, safe, cautious drivers. But sometimes damage that occurs has nothing to do with you or your skills behind the wheel. Combine dirt from the road with freezing conditions and it not a pretty sight. 

SAAP Insurance

Sand and Ash Protection (SAAP) is a type of insurance that you not have heard of before. Let me explain it a little. So as I’m sure you’re aware, Iceland has hundreds of volcanos. Around 30 of them are still active. Several have even blown their top in the last decade or so. Well, in addition to being really scary and disrupting flights from Greenland to China, there’s also something else that happens. All that ash that gets spewed into the air? Eventually, it settles on the ground and becomes part of the Icelandic landscape. A little-known fact about Iceland is that we get sandstorms, just like in the Middle East. These little surprises will come out of nowhere. High winds kick up sand, ash, pebbles, gravel, and all other sorts of things that can damage your car when they reach a crucial velocity. Not super fun. Sand and Ash Protection will give you peace of mind.

TP Insurance

Theft Protection (TP) is really the only type of car rental insurance in Iceland that I consider optional. That’s because unlike the elements, people here are pretty harmless. I can almost guarantee that in my lovely, Scandinavian, low-crime country, no one is going to steal your car. They’ve probably got their own. Motorhome, campervan, and car rental companies know this, so they usually throw in this type of coverage for “free” and your deductible is zero. They’re not really worried and know the risk is low.

Do I Really Need Car Rental in Insurance in Iceland?

In a word, yes. With the exception of Theft Protection (TP) insurance (our plundering Viking days ended long ago), I highly recommend you get the full suite of coverage. CDW, SCDW, GP, and SAAP insurance are meant to protect you and your pocketbook in Iceland. Get the maximum amount of insurance you can. See if you can get an all-inclusive package that bundles the insurance for a low price. Some companies even offer comprehensive coverage for all five types of insurance. Do your research and let us know if you have any questions. Happy driving!