Motor insurance is organized somewhat differently in Iceland than in many other parts of the world. And priced differently, too. You’ll find out what the prices – and suitability – of various car insurance policies in Iceland are just from this article.
In Iceland, in tourist practice, you can’t buy TPL, Casco or Assistance insurance separately. All these types of insurance are, so to speak, lumped together. Generally you can only decide on what specific types of damage/risk are or aren’t included in your insurance and what’s your deductible.
This leaves us with two things to decide:
Formally, of course, these are two separate things, but from the customer’s perspective there is little difference between them. If a given event (e.g., a broken windshield) is not covered, or is covered but with a very high deductible, we will still de facto pay for such repair out of our own pocket….
A key element of what we have influence over and can decide when buying car insurance in Iceland is the so-called deductible (excess, but in practice you also meet the terms self risk or personal risk). By default it is quite high, but for the right fee we can reduce it, even to zero. This is known as eliminating the deductible.
Deductible is sometimes defined as a percentage (so, for example, you pay 15% of each repair costs), but in Iceland the standard is a quota deductible. This means that regardless of the total repair costs, you always pay the deductible first and then the insurer covers the remaining part.
Specific values vary, but the typical deductible is around 500,000 ISK (about $3,600). So regardless of the total repair cost, under standard insurance T&Cs, you always pay the first $3,600 and the insurer only pays the remaining part. In a sense this means that you are only insured against damages larger than the deductible, because if the repair cost is lower, then you pay for it in full, even though you are insured.
So all in all, under the standard insurance conditions, almost all the small damages and a really large part of the larger repair costs falls to you anyway. You are only largely protected against totalling the car or damages nearing that. But even then, this is under the general condition that the damage was not a result of something that was not covered or was excluded (like, in many cases, theft, wind damage or flooding; and DIU, of course).
Specific to Iceland are mountain roads (F) and conditions for entering the interior. If you intend to enter the interior of the island, or drive on F roads at all, it’s worth asking selected rental companies about how they treat these roads and whether they apply special exclusions for selected roads, for example.
You can read more about mountain road conditions (and more) in the article road conditions, regulations and fines in Iceland.
The biggest enemy of rental cars in Iceland are rivers and streams, and that’s why some rental companies (and some insurance companies) ban such roads in general, where streams are plentiful or where fords are (or periodically happen to be) deep. And these are precisely some mountain roads.
In addition, some rental companies apply special penalties (deducted from your deposit) if they find that you entered a road you were not allowed to enter at all!
Pay special attention to this if you are going, for example, on F88 (one of the roads to Askja) or on F249 (Thorsmork). If the rental company does not allow you to enter some selected roads, it is usually these two. In addition, some rental companies may also exclude, for example, the F210 (north of Thorsmork), the western part of the F910 (between Askja and Nyidalur), the F894 (the end of the approach to Askja) or the F578 (the drive from the Vidgelmir cave area to the north). With the exception of F894, which I don’t know why it was excluded in one of the companions, all the other roads are connected precisely by a large number of fords, which more often or less often can become deep, rapids and generally impassable.
You can read more about these, and several other, interesting roads in Iceland in the article The most important roads in Iceland.
Iceland is a really expensive country, so the cost of possible repairs here is also much higher than elsewhere. Hence, insurance costs are also high. That’s why buying more extensive insurance than we have at home can be particularly justified here, although the prices of some insurance are nonetheless exorbitantly high….
The exact choice of insurance options depends on your individual preferences and driving plan. It is best, of course, to choose such a version or such a package, so that you do not worry about your car, and focus on enthusiastic enjoyment of Icelandic nature.
On the other hand, if the cost of insurance is going to block you from coming, it might be better to plan in advance to drive very, very carefully, and save money…. It’s your individual decision, but maybe it will be easier for you to compare the cost of renting a car, the cost of its insurance and the cost of selected accommodations, which we prepared in the article What car to rent in Iceland.
Of course, everything in Iceland is expensive, so also insurance (but also repair costs) are higher here than in elsewhere in Europe. Should this affect your decision on the different types of insurance, and how? Let’s go through them all one by one.
Insurance or waiver of deductible (usually called SCDW – Special Collision Damage Waiver) reduces the level of cost accrued to you, i.e. the repair cost that you have to pay. Usually only in Platinum (or other similarly named) packages this is really reduced to zero. In ordinary SCDW, for example, your liability level (i.e. deductible) is set to 90,000 ISK (ca. $650).
If the repair cost is $1,500 and your deductible is $300, then you pay $300 and your insurance company covers the remaining $1,200. But if the repair cost is below $300, you pay for it in full (although there variations to this).
In SCDW insurance, you are covered both against third-party damages (i.e., damages caused by you to someone) and Casco (i.e. damages caused to your car). So in other words: SCDW combines typical TPL and Casco insurance.
| Costs of waiver (of deductible) | |||
|---|---|---|---|
| ordinary CDW | Super CDW / SCDW | Premium CDW / PCDW | |
| Deductible | $2,700 – $3,200 | $550 – $800 | $0 (full waiver) |
| daily cost | included in the rental price | $15 – $22 | $30 – $35 |
| cost per 14 days | $0 | $225 – $300 | $400 – $470 |
However, in crowded parking lots, it happens here sometimes, unfortunately, that you return to your car and find a fresh scratch on it from an unknown perpetrator. In addition, if you feel unsafe driving in a foreign country, or if you are renting a different car than the one you drive every day, then removing (or limiting) the deductible is probably a good product for you. It can be expensive, but after all, everything in Iceland is expensive (including repairs to even minor damage).
Note that if you are looking for full removal of deductibles, a full insurance package (such as the so-called Platinum Package) may cost you little more. We write about this at the end of this article.
Iceland is an island and no one steals cars here, not least because it would be very difficult to export them from here. As a result, theft insurance (TP – Theft Protection) is really cheap, and often overlooked altogether or only available as part of a full package.
If you want complete peace of mind, then of course you can buy such insurance. But there is really no car theft in Iceland, so if you have the option to opt out of anti-theft insurance – you can safely do so.
Keep in mind that if you do not buy this casco as part of one of the full insurance packages (Platinum Package / Premium Package), you are probably buying it with a deductible, for example, of 100,000 ISK (ca. $715). This is not a lot, but nevertheless you will bear some liability for a possibly stolen car.
| Theft casco costs | |
|---|---|
| Theft insurance – TP | |
| daily cost | $5 – $7 |
| cost per 14 days | $80 – $100 |
| typical deductible | $700 |
If you buy such insurance – Theft Protection – as part of a full package (such as Platinum Package) then most likely your deductible is waived to zero.
Many roads in Iceland are gravel roads. Today they are primarily mountain roads, in the interiors, but you will also find them near Highway 1 and at some attractions on Snaefellsnes or in the Western Fjords.
Pumice landscape on the F26 road
Unfortunately in Iceland there is a real risk of super strong wind picking up small pieces of gravel and throwing it at cars. If you’re driving in a storm or haven’t parked in properly sheltered area (which, admittedly, can sometimes be difficult), you’re at risk of losing all window glass…
In our experience, rental companies turn a blind eye to really tiny damages. But already a small ‘spider’ on the windshield will be noticed and will require repair. I recently had the opportunity to repair a ‘spider’ in Namibia. The cost of this repair there was the equivalent of about $55. Meanwhile, in Iceland, the repair of such damage costs as much as 30,000 – 40,000 ISK, or well over $200!
So you have two choices: buy insurance and don’t worry, or pay attention to stay really far from the preceding car on the gravel roads (and slow down and keep as much distance as possible when passing). $225 or even $300 for a simple repair of a ‘spider’ on the windshield is really quite a lot, and it’s a pity to be stressed all the time whether we will be hit by some random pebble. On the other hand, we drive fairly slowly on gravel anyway, and the roads of the interior are rather empty even in the peak season. The chances of driving behind another car here are rather small, and it’s quite easy to avoid such a risk.
| Costs of gravel casco – GP | |||||||
|---|---|---|---|---|---|---|---|
| no additional protection | casco GP (Gravel Protection) | ||||||
| daily cost | included in the rental | ca. $10 | |||||
| cost per 14 days | $0 | $155 | |||||
| deductible | ca. $550 | $0 | |||||
Although the cost of windshield repair is high in Iceland, but as you can see in the table also insurance is not cheap. With a 2-week trip buying such insurance for the first repair de facto we pay half out of our own pocket anyway. Therefore, it seems to be an interesting offer for short trips, but for longer trips it is probably better to bet on caution.
On the other hand, this is another insurance always included in full insurance packages. It certainly increases their attractiveness to some extent.
The full name of this insurance is Sandstorm and Ash Protection (SAP, or sometimes SAAP). This insurance is designed to protect against the effects of a sandstorm that could severely damage a car’s paint.
Sandstorm over kemipng Landmannalaugar
Campgrounds are usually located in areas sheltered from the wind and reasonably safe from such risks. However, parking lots at major attractions no longer always offer this peace of mind.
On the other hand, there is practically constant strong wind in Iceland, so most of the dangerous particles are blown into the ocean as soon as they appear on the ground (so the wind blows, but there is nothing to pick up). Besides, paint and glass also have their own resistance, and ordinary wind in a dusty place will do nothing to them. However, if you happen to experience a particularly strong storm – anything can happen.
| Sandstorm and Ash Protection insurance (SAP) | |||||||
|---|---|---|---|---|---|---|---|
| SAP insurance | |||||||
| daily cost | $10 – $30 | ||||||
| cost per 14 days | $155 – $400 | ||||||
| deductible | $670 – $1,350 | ||||||
In general, the risk of a dangerous sandstorm is not high. For good reason, it is a rather unknown insurance outside Iceland. However, since March 2021, the Reykjanes peninsula has seen almost constant lava flows and ash outpouring from the Geldingadalir. Several other volcanoes have also increased their activity levels and are in danger of erupting. Therefore, of course, the risk is higher than usual and if you want peace of mind – buy this insurance.
Note that – as with theft insurance – if you buy this product separately rather than as part of a full package, you will most likely be subject to a pretty high deductible (as in the table above). On the other hand, compared to the cost of painting the whole car and replacing, for example, all the windshields on the windward side, such a deductible can probably be described as not much.
Unfortunately, a fairly common “insurance event” in Iceland is driving into a river or stream with a car that should not be there. Or driving into a stream when it is too deep or rapid. Or simply making a mistake by the driver and driving into some deep or soft bottom that immobilizes the car in the water. Or finally, driving into a stream without four-wheel drive engaged….
Unfortunately, although this is a fairly common accident, and driving on the interiors it is very difficult to avoid driving through fords, nearly no insurer in Iceland offers coverage for flooding or drowning of a vehicle (known as water damage).
The only rental company I know of that offers such insurance is Thrifty.is And it offers them exclusively for two “urban SUVs”: Mazda CX-30 AWD and Ford Kuga AWD.
The insurance is called River Ford Crossing (RFC for short), and it just includes protection against the effects of flooding or drowning of the car while crossing fords. However, it can only be purchased for the two models indicated above, and for these cars the entire F88, F249, F578 and F894 roads are excluded from coverage (although there are no fords on F894 exactly).
All in all, therefore, only crossing relatively shallow and safe fords is covered. Especially since the insurance conditions specify that the water in the stream being crossed must not reach higher than halfway up the wheel. And after all, Mazda CX-30 and Ford Kuga don’t offer particularly high suspension anyway. Nevertheless, insurance is available and it’s worth knowing about it….
| River Fords Casco – RFC | |||||||
|---|---|---|---|---|---|---|---|
| River Fords Casco – RFC | |||||||
| daily cost | ca. $65 | ||||||
| cost per 14 days | ca. $950 | ||||||
| deductible | 500,000 ISK – about $3,500 | ||||||
As you can see above also the only company offering such insurance not only does not de facto insure crossings of really dangerous fords, but in addition the insurance offered is quite expensive (more expensive than, for example, the full Platinum package – see below) and limited by a sizable deductible (it is not waived even in the Platinum package).
So first we pay over $900 for insurance, and then the first $3,500 for any repairs is also covered out of our own pocket. In addition, the car rental itself is clearly more expensive in Thrifty than the offers we showed in the How to rent a car in Iceland All in all, then, it’s not a particularly attractive offer, and it’s hardly surprising that the company’s representatives themselves admit that there hasn’t been a customer who has used it in years….
Wanting to drive on the interiors will certainly come out better for spending the extra money on a larger 4×4 vehicle than on this insurance. For a taller off-road vehicle in many fords, the water will barely reach the axle anyway, and it can handle them without the slightest problem.
And we must approach any water crossing with extreme caution anyway. Note that even if the insurance company takes on the cost of repairing the damage, no one will reimburse you, for example, for the time lost in coming to help and towing the car to the garage, or replacing it with a new one….
Many rental companies and insurance companies also offer customers so-called full insurance packages. These usually come in two variants.
One of such variants is really full and is usually called Platinum or Premium (sometimes, unfortunately, also PCDW, which is easily confused with the deductible insurance itself). This is a package that covers all types of insurance (without RFC) and removes the deductible on all types of damage to zero. This is often the only way to lift the deductible to zero. Also included in this package most often is the tire insurance we didn’t mention earlier (and rarely available separately).
The second variant, this ‘almost full’ one, is usually called Golden or Grand (sometimes also GCDW). Unfortunately, in some rental companies, it is this not-quite-full package that is called Premium – as in other rental companies the truly full package…. This is another reason why it’s essential to see the description or terms of the package, not (just) the name. The terms of this almost full package sometimes vary. Sometimes it is a set of all insurances, but without lifting the deductible to zero. Most often, however, some “smaller” insurances (such as SAP or tire insurance and – of course – RFC) are also excluded from this package.
| Costs of full insurance packages | |||||||
|---|---|---|---|---|---|---|---|
| Golden Package | Platinum Package | ||||||
| insurance covered by the package | all except SAP, RFC and tire insurance | all except RFC | |||||
| deductible | $350 – $800 | $0 | |||||
| daily cost | $20 – $35 | $30 – $50 | |||||
| cost per 14 days | $315 – $500 | $425 – $715 | |||||
As you can see from the table above, the price we have to pay for a gold package in one company may be enough for a platinum package in another…. Therefore, we urge you to always compare the price of a car rental together with the price of the corresponding insurance package.
On the other hand, in general, the sum of the costs of all the previously mentioned packages can reach up to $900. Therefore, if we want to insure ourselves strongly/highly, it almost certainly pays to do so just as part of a package, rather than buying selected insurance coverages separately.
Personal insurance is a separate topic. I have not heard of theft of equipment or valuables from cars or tents in Iceland. But anyone can twist an ankle or accidently damage someone else’s property. So in terms of travel insurance, buy the same package as for other trips or the one you use at home.
On the other hand, if you are an EU citizen, it is definitely worth having an EHIC card with you (European Health Insurance Card). If something were to happen to you that required a doctor’s care or a hospital stay, it’s certainly better not to pay for it in Iceland with your own money. You’ll need to refer to your local Ministry of Travel resources (or similar) for details, but you can see a more general overview here: What is EHIC.
If you already know what kind of insurance you’re interested in, you can move on to an article describing the different types of cars available in Iceland. We compare their advantages and disadvantages, usefulness on different trips and, of course, costs. Read all about the cars, off-road vehicles and various types of RVs available in Iceland here: What car to rent in Iceland.
Also consider the specific road conditions in Iceland and familiarize yourself with some of the laws and – just in case – the amount of fines for certain traffic offenses. We have compiled this information here: road conditions, regulations and fines in Iceland.
Finally – it’s a good idea to know more about the roads you are traveling on. This will come in handy both for choosing the right car (and insurance) and for final decisions on your itinerary. Read our subjective selection of the most important roads in Iceland here: Most important roads in Iceland.
If you need inspiration for planning your itinerary, you can start with our TOP10 lists – such as Top Road 1 Attractions (+ 10 bonuses) – or our suggestions for Best Iceland itinerary (summer, 4×4, 14 days).
