Iceland Car Rental Insurance Explained: What's Included and What Isn't

You've booked your flights to Iceland! You have a few places on your itinerary, so you start looking at rental cars. Everything seems straightforward, that is, until you get to the insurance options.

CDW. SCDW. GP. TPL.

Yikes! Renting a car in Iceland suddenly feels more complicated.

Most travellers know they need insurance, but figuring out exactly what they're paying for can be confusing. Some protection is already included in the rental price, while other coverage costs extra. And yes, even the most comprehensive insurance package has exclusions.

Iceland also presents a few driving hazards you might not encounter at home. Think: loose gravel, volcanic sand, and powerful winds.

Before you pick up your rental car, spend some time understanding how insurance works here. No, you don't need to memorise every abbreviation, but you should know what's covered and what could end up costing you money.

Why Is Rental Car Insurance Different in Iceland?

Iceland has some of the most beautiful driving routes in the world, but it also has weather that doesn't always cooperate with your travel plans.

You can leave Reykjavík under gorgeous clear skies and hit heavy rain and strong winds before you reach your destination.

Then there are the roads themselves. While most of the Ring Road is paved, gravel roads are common throughout the country. A passing vehicle can send small stones flying towards your windscreen, and what seemed like the perfect drive can leave you with a chip or crack.

That's why you will see insurance options in Iceland that you might not recognise from renting cars elsewhere. Gravel Protection and Sand and Ash Protection, for example, address damage associated with Iceland's roads and weather.

So, what do you actually need?

What Insurance Is Included with Ring Rental?

At Ring Rental, several types of protection are already included in your rental price. You don't have to buy a separate package to get collision and gravel protection.

Collision Damage Waiver (CDW) and Super Collision Damage Waiver (SCDW)

These two protections work together, so it makes sense to explain them together.

Collision Damage Waiver (CDW) limits your financial responsibility for eligible collision damage to your rental vehicle.

Super Collision Damage Waiver (SCDW) reduces the amount you may have to pay if that damage occurs.

Both are included with every Ring Rental booking.

With the included protection, the collision excess is:

• 150,000 ISK for cars and 4x4s
• 200,000 ISK for motorhomes

Gravel Protection (GP)

If you're planning to drive around Iceland, you will almost certainly encounter gravel.

Gravel damage doesn't always happen because you're driving too fast. Sometimes another vehicle passes in the opposite direction, kicking up a stone that strikes your windscreen.

Our gravel protection covers eligible damage from loose stones hitting the windscreen, headlights, and front of the vehicle.

It’s included with every booking, with a listed excess of 25,000 ISK.

Theft Protection (TP)

Theft Protection limits your financial responsibility if the rental vehicle is stolen, subject to the rental agreement. It's included with every Ring Rental booking.

Keep in mind that Theft Protection applies to the vehicle, not the belongings you leave inside it. If your luggage, camera, or laptop is stolen from the car, the vehicle's Theft Protection doesn’t cover those items. Your personal travel insurance may provide some protection, depending on your policy.

Third Party Liability (TPL)

Third Party Liability covers eligible injury or property damage caused to other people.

For example, if you're involved in an accident that damages another person's vehicle, Third Party Liability may apply. This is different from CDW, which covers damage to your rental car. Third Party Liability is included in your booking.

What Is an Insurance Excess, and How Does It Work?

An excess is the amount you're responsible for paying towards a covered claim. You might also hear it called a deductible.

Let's say you rent a car from Ring Rental with the included protection. During your trip, you accidentally damage the vehicle, and the repair costs 250,000 ISK. If CDW and SCDW cover the damage, your financial responsibility would generally be limited to the 150,000 ISK collision excess.

But what if the damage costs only 60,000 ISK? You wouldn't automatically pay the full 150,000 ISK. You would generally pay the actual repair cost of 60,000 ISK.

The excess limits your responsibility for eligible damage. It’s not a fixed charge every time something happens.

An Excess Is Not the Same as an Exclusion

An excess is what you may have to pay when your protection covers the damage.

An exclusion is damage or an expense that isn't covered at all.

For example, if you drive through a river and damage the engine, Ring Rental’s  protection doesn't cover that water damage. The usual collision excess wouldn't limit what you could owe.

So when you see phrases like "zero excess" or "full coverage," don't assume they cover every possible situation.

What Does Ring Rental's Platinum Protection Include?

We also offer optional Platinum Protection, which reduces your excess to zero for covered damage and includes additional protection against some of Iceland's more unusual driving hazards.

Here's how our two packages compare.

Exclusions apply to both packages. See Ring Rental's insurance page for full coverage details.

Sand and Ash Protection (SAAP)

Sand and Ash Protection is relevant if you're planning to explore Iceland's South Coast.

If you're driving along Iceland's South Coast, you'll see plenty of volcanic sand. On windy days, that sand can blow against your car hard enough to damage the paint, and those scratches aren't always cheap to fix.

You don't need to be anywhere near an erupting volcano for this to happen. An ordinary windstorm can cause considerable damage.

Sand and Ash Protection covers eligible damage caused by these conditions. At Ring Rental, it's included with Platinum Protection.

Tyre Protection

Iceland's gravel roads and rough surfaces can be hard on tyres. Platinum includes protection for eligible tyre damage, which may be useful if you're planning a longer road trip.

Our Platinum Protection covers eligible tyre damage with zero excess.

Animal Damage Protection

Iceland's sheep are lovely, but they're not particularly interested in traffic rules. During the warmer months, sheep can often be found grazing near rural roads. Occasionally, they wander into the road.

Platinum includes protection for eligible animal-related vehicle damage. Of course, it's still important to slow down whenever you see animals near the road.

Can You Use a Debit Card with Platinum?

Yes. Platinum Protection also allows the main driver to use a physical debit card in their name instead of a credit card. Without Platinum, we require a physical credit card in the main driver's name.

Neither protection option requires a security deposit. You can compare the details on our insurance page.

What's Not Covered by Rental Car Insurance in Iceland?

Even with Platinum Protection, some types of damage remain your responsibility, and a few of these exclusions are especially important if you're planning to explore beyond Iceland's main tourist routes.

Water Damage and River Crossings

Driving through rivers is one risk associated with Iceland's Highlands. Water levels and currents can change quickly, and a crossing that looks manageable may be more dangerous than it appears.

We exclude water damage, including damage caused by river crossings. Even if you're driving a 4x4, don't assume every river crossing is safe or that resulting damage will be covered.

Undercarriage Damage

The undercarriage includes the parts underneath your vehicle. Rocks and uneven roads can damage these parts, especially if the vehicle doesn't have enough ground clearance.

We exclude damage to the chassis and undercarriage. If you're planning to travel on rough roads, make sure your rental vehicle suits the route.

Wind Damage to Car Doors

Iceland's wind can be surprisingly powerful. One moment you're opening your car door, and the next a gust catches it and pulls it out of your hand.

If the door is forced beyond its normal range, it can damage the hinges or frame. We exclude this type of structural wind damage, even with Platinum Protection.

Hold onto your door when opening it, and remind passengers to do the same.

Driving on Prohibited Roads

Not every rental vehicle can be driven on every road in Iceland.

Two-wheel-drive vehicles cannot be driven on Highland F-roads, Road 35 (Kjölur) or Road 550 (Kaldidalur).

Some of our approved 4x4 vehicles may be driven on permitted Highland routes when the roads are open and conditions allow. But there's an important exception: F-249 is prohibited for all our rental vehicles, including 4x4s.

Driving off-road is also illegal in Iceland. Stay on permitted roads, and never drive on a closed road.

If you drive somewhere your rental agreement prohibits, you may be responsible for the full cost of any resulting damage, regardless of which protection package you've purchased.

Before heading into the Highlands, check that your particular vehicle is approved for your route.

Other Exclusions to Know About

Our insurance terms also exclude or restrict coverage for damage involving negligence, driving under the influence, incorrect fuel and damage to the vehicle's interior.

Motorhome renters should pay attention to wind restrictions. We exclude motorhome damage caused by driving when wind speeds reach or exceed 15 metres per second (approximately 54 km/h or 33 mph).

Traffic fines, parking penalties, and toll charges are separate expenses and aren't covered by vehicle damage protection.

These examples aren't a complete list, so read the rental terms and conditions before picking up your rental car.

Is Roadside Assistance Included in Rental Insurance?

Let's say your rental car gets stuck in snow or sand. The vehicle might not be damaged, but you still need help getting it out. That assistance may come with a separate charge.

We offer an optional Roadside Assistance Waiver to help with eligible recovery costs. This is separate from Platinum Protection, which covers certain types of vehicle damage but doesn't automatically pay for roadside help.

What To Do If Something Happens

Nobody plans to have an accident on holiday, but it's worth knowing what to do if something goes wrong.

First, stop somewhere safe. If anyone is injured or there's immediate danger, call 112, Iceland's emergency number.

If you're involved in an accident, notify the police. Our rental agreement requires police notification following a collision or accident, even if the damage seems minor.

You'll also need to contact us as soon as possible at +354 571 2266.

If it's safe to do so, take photographs of the damage and note where and when the incident happened. Don't arrange repairs without our approval.

One more important detail: only drivers named in the rental agreement are authorised to drive the vehicle. If someone who isn't registered drives the car, the insurance protection may become void, leaving you responsible for the damage.

Do You Really Need Extra Car Rental Insurance in Iceland?

Well, it depends on your plans and how much financial risk you're comfortable accepting.

Reykjavík and the Golden Circle

If you're staying around Reykjavík and visiting the Golden Circle on well-maintained roads, the included protection may be enough for you. You'll already have collision and gravel protection, although the standard excess still applies to eligible damage.

If you're comfortable with that potential cost, you may not need Platinum.

The Ring Road and South Coast

For a longer road trip, we would give Platinum serious consideration.

You'll be spending more time driving, and some stretches of the South Coast are especially exposed to windblown sand.

Platinum includes Sand and Ash Protection and Tyre Protection, which would be practical when you're covering longer distances.

Winter Road Trips

Winter brings snow, ice, strong winds and changing road conditions.

Platinum can reduce your financial responsibility for eligible covered damage, while the separate Roadside Assistance Waiver may help with certain recovery costs. Some damage remains excluded, and there are times when the safest decision is not to drive at all.

The Highlands

If you're planning to explore the Highlands, start by choosing the right vehicle and checking which roads you're allowed to use.

A suitable 4x4 is essential for approved F-road routes, but not every Highland road is permitted under our rental agreement.

We'd recommend considering Platinum for its additional eligible damage protection, but remember that river damage, undercarriage damage and prohibited-road damage remain excluded.

No insurance package makes a dangerous river crossing safe.

Choosing the Right Protection for Your Iceland Road Trip

You'd probably rather be planning which waterfalls to visit or how much time you'll need to explore the South Coast, but insurance is much easier to sort out before your trip than after something goes wrong.

At Ring Rental, CDW, SCDW, Gravel Protection, Theft Protection, and Third Party Liability are already included in your rental price. Platinum Protection adds coverage for certain additional risks and reduces your excess to zero for eligible damage.

Before booking, take a look at where you'll be driving and what each protection option includes.

If you're still unsure, contact us. Tell us a little about your plans, and we'll help you understand your options.

You can compare our insurance packages or browse our rental vehicles before booking