insurance

This is the preliminary version of the article. We hope to add more insurance providers in the near future, especially for our US-based friends. Share with us what you find to be the best value-for-money car rental insurance for Iceland in the comments, in our FB group, or write us an email!

Me, you, and probably 99.9% of other Icelandic visitors have already wondered, how to choose the best insurance for their car rental in Iceland. The task is not easy, because insurance options vary widely and are not unified across car rental providers. There are, however, multiple common features for every car rental insurance. The same applies to common threats. So let’s summarize all of these and then look at the available options.

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TLDR – tell me the best insurance!

To simplify it the most, if you prefer full coverage, I suggest the following:

Compare the price and the content of the full (a.k.a. “platinum”) insurance offered by your Icelandic car rental company to Lotus and RentalCover below and choose for yourself. Personally, we always use Lotus or RentalCover. These two offer the best level of insurance for a price (usually) comparable with anyone else:

• Lotus car rental with their Platinum insurance covers EVERYTHING including river crossings. You can support us by using a 5% discount for Lotus with promo code: epicicelandd5
• RentalCover, a top-notch external insurer insures you against everything except river crossings, usually for a much lower price compared to the car rental companies

Beware! Even full platinum insurance packages most of the time don’t cover water damage / river crossing (we know only of 2 companies that do – Lotus and Blue car), and even many other damage types like undercarriage or doors and windows.

For example, as of 1.6.2022, one of the most popular car rental companies in Iceland offers platinum insurance for a 7-day Dacia Duster trip for 300USD. However, their platinum insurance does NOT cover:
-undercarriage, wind, tires, windows, water damages

You can have a better level of coverage for a lower price with RentalCover. RentalCover’s 4×4 insurance (for non-US citizens) covers everything except river crossings for, in this example, 240USD / 200Eur. 

A full picture is not that easy though, there are more things to consider. Don’t want to buy full Icelandic car rental insurance? Or do you just want to understand the details? Well my friend, then read below…

What are the risks of a car rental in Iceland?

1. Collision – damages to your car
2. Collision – damages to someone else’s car
3. Someone steals your car
4. Loose gravel hits your car
5. Sand or ash damages your car (engine or anything else)
6. You damage the undercarriage / chassis of your car
7. You damage the tire
8. You damage the windows
9. You damage the doors (e.g.: wind overthrows them)
10. Water damages your car (engine or anything else)
11. Animals damage your car
12. Car can’t move and you need towing

Yes, all of this can actually happen when you drive in Iceland. Yes, all of this is usually charged separately (excluded from the basic insurance). Is it likely it will happen? Well, most of the time no, but this obviously depends on your driving skills. One thing is certain – there are more threats on Icelandic roads than on a typical American / European road (I said typical, for sure there are some more dangerous roads).

Important: How to choose the best car for Iceland?

So do we just want to scare you so that you buy our insurance? No 🙂 It’s just good to be prepared and set the expectations right so that you can choose for yourself.

What types of insurance are in Iceland?

Rule number one – always check the insurance conditions of your car rental company! Too difficult to understand? Well, obviously… But, what you can generally expect is the following:

• What’s included in the basic price is usually only the compulsory insurance (see below)
• For some of the damages not included in compulsory insurance, you may buy an optional insurance

Compulsory insurance

There are two types of insurance that are compulsory for every car rental company in Iceland. This basically means you will always get these two included in the basic price:

• Collision damage waiver
• Third-Party Liability Insurance

1. The collision damage waiver (CDW)

The CDW covers costs for case (1) – damages to your car if there’s a collision. BUT. Almost always you have to pay as well. This is called “the deductible”, “the driver’s liability” or “the excess”.  So the usual example goes like this: there’s a CDW with 300 000 ISK deductible, which means, you will pay ALL damages up to 300 000 ISK (2350 USD). If the damage is bigger, you will not pay the rest.

Secondly, the CDW will usually not cover many types of damages. Usually, all of the bullet points (3) to (12) above are not covered. To insure against them, you have to either buy optional insurance or buy completely different insurance.

2. The third-party liability insurance (TPL)

The TPL covers costs for case (2) – damages to someone else’s car if there’s a collision. You don’t pay anything in this case. These damages are covered by TPL.

Optional insurance

Well, we’ve covered 2 cases out of 12 so far, what about the rest? Car rental companies offer to cover SOME of those as optional insurance. The word “some” is very important here because only very few companies cover most of them and we know only of Lotus and Blue Car.

What are the typical optional insurance options in Iceland?

1. The super collision damage waiver (SCDW)

Do you remember how we talked about “the deductible”, “the driver’s liability” or “the excess”? That’s the money you may pay if you damage your rental car. The SCDW lowers this amount. If you buy this optional insurance, you will pay a lower (sometimes even zero) deductible in case of an accident.

3. The theft protection (TP)

This covers costs for case (3), i.e. someone stealing your car. Usually, there is no deductible, so you usually don’t pay anything if it happens. It’s worth mentioning, though, that car thefts are very rare in Iceland.

4. The gravel protection (GP)

If I had to take just one optional insurance in Iceland, it would be gravel protection.  Gravel is everywhere in Iceland. And most of the gravel is on F-roads. Which you should see because they are beautiful! This is the type of damage that happens almost always. So better be insured against it 🙂

5. The sand and ash protection (SAAP)

Although this sounds like insurance against volcanic ash, that is not its main purpose. There are several sand fields in Iceland, most of them in the South. They are mostly exposed to the wind after the snow thaws, i.e. in February, March, and April. Now imagine what happens if the wind blows enough sand into your engine? Nothing good 🙂 That’s where the SAAP comes in. Do you need it in summer? Usually no, but no one can rule out that sand will get into your engine in some cases.

Some car rental companies offer more optional insurance, but for the typical company, the list usually ends here. So, we’ve covered 5 out of 12 cases now! What about the rest?

Important: How to choose the best car for Iceland?

These are the less typical optional insurance options in Iceland:

6. The undercarriage / chassis insurance

Imagine driving over big rocks on some of the F-roads, for example when heading to Askja. It’s not that hard to hit the undercarriage, a.k.a. chassis of your vehicle and to damage it. Most of the insurance packages do not cover this! You have to either buy the optional undercarriage insurance or buy different insurance that will cover that.

7. The tire insurance

Unfortunately, even damage to tires is excluded from basic insurance packages most of the time. This means, should anything happen to your tire (or sometimes even a wheel), you will be fully responsible for that. Unless you buy optional insurance or different insurance which will cover all of these.

8. The window insurance

The same applies to windows. This is usually a separate “insurance item”. That means, anything happens to windows – you are fully responsible for that and will pay for that. Unless you buy optional insurance or different insurance which will cover all of these.

9. The door insurance

Even doors are usually excluded from basic insurance and even many optional insurance packages. The damage to doors is pretty common in Iceland, mostly due to strong wind and people not taking enough care when opening and closing their doors. You may insure against the door damage by buying optional insurance or different insurance which will cover all of these.

10. The water insurance

If you want to drive F-roads with river crossings, this is one of the most important points. Car rental companies don’t cover water damage, not even in their platinum packages! As of now, we know only about Lotus car rental, which does cover water damage. Recently Blue car also joined to become the second company to cover river crossings.

A PROMO CODE epicicelandd5 will get you a 5% discount with Lotus and us a small commission at no extra cost to you.

What does this mean? Well, if you cross the river on an F-road, and let’s say the water gets into your engine, your engine may die. And you may remain stuck in the water. And you will be paying for towing + new engine. How much can a new engine cost? Well, easily even 10 000 USD!

A 5% Blue car discount link will save you money on your car rental and earn us a small commission at no extra cost to you. *if it doesn’t work, please copy-paste the link into a different browser or into the private/incognito window of your browser

“So what should I do??” Well, either go for Lotus with water insurance (and, please, even in this case study carefully the river crossings!!) or take special caution and try to avoid bigger river crossings. We wrote a list of all F-roads with the size of their river crossings described (this may change in time though! always check conditions at the time of your trip).

11. The animal encounter insurance

Yes, this doesn’t happen often, but seldom it does. During our trip, we’d actually met more sheep than tourists 🙂 And sheep often don’t act logically, some being really stubborn getting at the road at the most inconvenient time. This, in the first place, means, take special care not to harm animals in Iceland!

If, in any case, an animal damages your car somehow (hopefully nothing happens to the animal, let’s rather picture a scenario of an angry sheep scratching your car), you will be fully responsible for that. Unless you buy optional insurance or different insurance which will cover all of these.

12. The towing insurance

Got stuck in the river? Stuck on the rock? Stuck in the sand? Is your engine dead? Did you collide and your car can’t move? You will need towing. And towing isn’t cheap. And is charged separately. Unless you buy optional insurance or different insurance which will cover all of these.

What insurance should I choose?

The most common damages

Now, if you read all of this, here’s a little reward for you 🙂 What is in our opinion the most common damage happening to rental cars in Iceland? Well, if I had to pick Top 3, it would be 1) gravel damage, 2) water damage (if you go for F-roads with river crossings), 3) classical collision of any kind.

What happens less often, but still happens are the door damage (due to wind), tire damage (of course tires are under pressure on Icelandic roads, though this isn’t that expensive damage), and damage to the undercarriage of your car (if you aren’t careful enough).

What usually does not happen are thefts, animal encounters or window damages, and sand/ash getting into your engine outside of spring. 

Trip scenarios

Reykjavik and south 

Going just around Reykjavik, golden circle, and the south? Well, then you don’t need the water damage insurance. Also, gravel hitting your car, you damaging the undercarriage, or animals damaging your car are not very likely. Of course, anything may happen, though.

This means that usually, just basic compulsory insurance is enough. For peace of mind, you may take Gravel protection, Sand and Ash protection, and/or Super collision damage waiver if you feel unsure. Look at RentalCover how much they charge for insurance – it may be cheaper than buying insurance from your car rental company and cover you better.

Usually cheaper RentalCover will cover everything except water damage.

Ring road or winter trip

The ring road is long and winter is more dangerous, so I would generally recommend slightly better insurance. It’s better to have Gravel protection, Sand and Ash protection, and Super collision damage waiver. Some other options like Tire insurance, Window insurance, Door insurance or Towing insurance may be viable for your peace of mind as well, not necessary though. If you are not going for F-roads, water insurance is unnecessary.

Highlands with simple F-roads 

Going for highlands, F-roads, and gravel roads with no or just small river crossings? Well, then you probably need to be insured against everything mentioned in the article, except river crossings (water damage).

I suggest you first read well full/platinum insurance conditions of your car rental company. If they include all of the damages I mentioned in the article (usually they don’t), then compare their price against RentalCover. This external provider covers everything except water damage for a very good price.

Want to have covered everything, including water damage? Lotus car rental will cover it with their platinum insurance!

Highlands with more difficult F-roads

Going for highlands, F-roads, and gravel roads with medium river crossings? Get all available insurance, especially the one for water damage, undercarriage, and gravel!

There’s only 1 car rental company which we know about, that covers you against everything mentioned in this article, including river crossing. That is Lotus car rental. You can have a 5% discount for booking with them with our promo code: “epicicelandd5“

Alternatively, you may take special caution, avoid big river crossings and go for an insurance package without water insurance. In that case, I suggest you first read well full/platinum insurance conditions of your car rental company. If they include all of the damages I mentioned in the article (usually they don’t), then compare their price against RentalCover. This external provider covers everything except water damage for a very good price.

How to find out which roads have difficult river crossings? We’ve made a list of F-roads for you!

How does RentalCover work?

RentalCover is, in our opinion, the best 3rd party insurance provider for car rentals around the world, who will insure your Icelandic car rental. 

You need to buy insurance any day BEFORE the trip. If any accident or damage happens during your trip, this is the procedure to follow:

1. Create documentation of the accident (photos, notes)
2. Notify your car rental company immediately
3. Pay for the damages to your car rental company – require confirmation for that!
4. Send the documentation (photos, notes, your written communication with car rental company, confirmation of your payment) to RentalCover
5. RentalCover will pay you for the damage

The main advantage of a third-party provider like RentalCover is most of the time the better price and better insurance coverage. 

The main disadvantage is that you have to pay for the damage first, and you will get the money back afterward. 

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