No one expects to be involved in an accident, but they are called accidents for reason. It’s important to be prepared when they happen, especially when you’re in a foreign country on holiday. In Iceland, car repair can cost an arm and a leg due to the need to import materials from abroad and the high cost of living. That means repairing a rented car that’s been in an accident can ruin your holiday financially. 

The only way to avoid this potential pitfall is to include comprehensive insurance with your rental car. Insurance packages differ based on rental companies and it might not be easy to identify the best package for you, so let’s help you to identify the different types of common car insurance in Iceland and explain the car coverage packages that Hertz Iceland offers. We’ll explain all you need to know about the packages available, what they cover and help you choose the best one for you.

Related links: Check the Iceland car rental price

rental car insurance guide in Iceland

What are the classic and rare car insurances in Iceland? 

There are many rental car insurance packages available in Iceland. Some of these come included with your rental car, while others cost extra. For people on vacation in Iceland, it’s important to know the differences between them and why they are structured the way they are. 

There are mandatory insurance packages that come with rental cars in Iceland. These insure against liability to others in case of an accident, and the cost is built into your rental car fee. Optional fees that insure against damage to the rented car come at a small additional fee.

Here is the list of mandatory insurances that come with the rental car and some of the additions include:

Third-party liability insurance, TPL (aka PAI)

  • As it is mandatory in Iceland, third-party liability is included in your coverage package when you acquire any rental cars with Hertz Iceland. The cost of TPL is built into your overall rental fee, so you won’t have to pay extra for it.
  • Third-party liability insurance is an insurance that protects the holder from liability to a third party in case of an accident involving two cars, or a car and property. This means that if you are involved in a crash with another car or property, the insurance company will be held liable for any damage done to the other person’s car or property. 

Collision Damage Waiver, CDW

  • The CDW insurance is included in your coverage package when you acquire any rental cars with Hertz Iceland at no extra cost. 
  • Collision Damage Waiver refers to insurance taken against any damage to the body of the car. This, however, doesn’t include damage done to the undercarriage of the car or the tires. There is no insurance available in Iceland that will cover the undercarriage of cars. Incidents of theft and vandalism also aren’t covered by the CDW insurance.
  • CDW also comes with a non-waivable excess fee (N.W) which will vary based on the car you’re renting. Even with this insurance, you will still need to pay a small non-waivable excess fee in the event you are in an accident. 

Super Collision Damage Waiver, SCDW

  • The SCDW is included in your coverage package when you acquire any rental cars with Hertz Iceland.
  • As the name implies, it’s a super addition to the CDW. It allows for a lower non-waivable excess fee than the basic Collision Damage Waiver. 
  • This insurance is needed in case of damage to the car and is one of the “own-risk” fees that renters may have to pay on their vehicle. 
guide to iceland rental insurance

Theft Protection, TP

  • A Theft Protection package is available when you book any rental car with Hertz Iceland.
  • Theft protection is insurance against liability for theft of the rental car, in whole or in part. This is valid assuming the vehicle has been used as stipulated in the rental agreement.
  • Unfortunately, holiday seekers can often be targeted for theft and this insurance which forms part of Hertzs coverage package helps to minimize risk of financial liability in case of that eventuality. 

Sand and Ash Protection, SAAP

  • Sand and Ash Protection is available when you acquire any rental cars with Hertz Iceland. Since Iceland is a volcanic island there is high potential for ash damage, so it’s definitely a good idea to consider this add-on. 
  • SAAP insurance offers protection against damage to the car done by sand, gravel, ash and other earth materials.
  • Other insurance policies do not cover damage done by the sometimes rough terrain, and renters who do not have this policy will be charged for damage to the car caused by sand, ash, or other earthy materials. 

Gravel Damage coverage (also named Gravel protection, GP)

  • Covers damage to the windshield, headlights and paintwork damaged by gravel that gets thrown at the vehicle by passing cars or oncoming traffic.

The uncommon car insurance in Iceland

Tyres and wheels protection (also named Tire insurance)

  • This insurance is not offered by most car rental companies in Iceland
  • It can protect you from the damages made to tires and wheels

Door protection

  • This insurance is not offered by most car rental companies in Iceland
  • It can protect you from the damages made to car doors. The heavy winds in Iceland frequently cause car door damage, with this protection, these damages could be covered

Animal Encounter Protection

  • This insurance is not offered by most car rental companies in Iceland
  • It can protect you in the event of a collision with an animal (Icelandic sheep for example), or in the event that some wayward animal comes by and scratches your rental car. 

Is car insurance necessary in Iceland? 

But, is car insurance really a necessary expense when renting a car in Iceland? Regardless of where you are, there is always a risk of an accident or damage to your vehicle. Things might not go as smoothly as you imagined, and that could ruin your holiday if you’re not prepared. 

While on holiday in Iceland, the terrain, although stunning, can also be a hazard to vehicles and you will be thankful you’re insured against these hazards. The mountainous areas contain gravel roads and loose stones that can impact moving vehicles. There is also the danger of sand and ash causing damage to the paint on rental cars. 

Rough roads, especially during the winter months, can cause damage to the undercarriage of the car with rocks and ice fragments colliding coarsely against the bottom of the car. Even something as simple as opening car doors during a strong wind can cause damage to the doors. The wind can force the doors to open wider than their capacity. 

If you visit the beaches and oceanic areas of Iceland, then you will also have to guard against high tides damaging the engines and other parts of the car as well. 

Part of the allure of Iceland is how much wildlife there is, but they could potentially cause a threat to your car if you accidentally hit them or swerve to miss them. In addition to this, you will need to be insured against the regular risks of operating a vehicle anywhere in the world. Ranging from theft and accidents to accidental collisions. 

Should you fall victim to any of these hazards, you will be grateful to have adequate insurance to cover yourself. 

What is the must-have car insurance when you drive in Iceland?

At the very least, you will need to get the Super Collision Damage Waiver and the Sand and Ash Protection package. The SCDW covers you in the event of accidents with other vehicles or property. 

As explained earlier, the terrain in Iceland can come loose causing sand, ash and small rocks to be propelled into the air. The SAAP protects you from liability in cases where this debris damages your rental car. 

How much does each insurance cost?

Prices for insurance policies differ based on a number of factors, ranging from the car type/model to the type of policy being purchased. 

  • The price for CDW for a small car is 2,900 IKr ($21.91) per day, while the same policy for 4×4 SUVs, Jeeps, Vans, and Trucks costs 3,700 IKr ($27.94) per day. 
  • Similarly, SCDW for a small car would cost 1,800 IKr ($13.59) per day, while the same policy for 4×4 SUVs, Jeeps, Vans, and Trucks costs 2,700 IKr ($20.39) per day. 
  • Theft Protection for smaller cars as well as for SUVs is priced at 900 IKr($6.80) per day. 
  • Sand and Ash Protection for a small car is priced at 1,800 IKr ($13.59) per day while the same policy for 4×4 SUVs, Jeeps, Vans, and Trucks costs 2,700 IKr ($20.39) per day. 
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Hertz Iceland offers car coverage packages, with 0 excess

If you don’t wish to purchase each policy separately, you can take advantage of the car coverage package offered by Hertz which encompasses the SCDW, Theft Protection, and the CDW policies. 

The car coverage package comes at a lower price than the total of all three policies combined and is a great way to save some money while getting the most value for 

You can also get as much as 40% off the car coverage package if you book with Hertz in advance online. 

You can buy a MAX cover package with 0 excess when you pick up your car

Committed to creating an unburdened Iceland self-drive trip for you and your family, Hertz Iceland newly launched a brand new MAX coverage package which contains all insurances items we have available; it includes:

  • CDW
  • SCDW
  • TPL (also named PAI)
  • TP
  • WP
  • GP
  • SAAP
  • Tyres and wheels

By getting this coverage package with your rental car in Iceland, you can enjoy the ZERO self-excess in case of any damages, which are covered by the insurance items listed above.

This new package is available at the rental desk in ALL Hertz Iceland car rental stations. Regardless you are renting your car at the KEF international airport arrival hall, Reykjavik downtown or Akureyri. If you are interested, don’t forget to ask our staff members more about this when you pick up your car!

plug-in hybrid car rental in Iceland

What is self-risk/ self-excess/ self-liability in car insurance? 

These three terms all mean the same thing. They refer to a renter’s ability, and choice to insure themselves against the possibility of damage to the vehicle from an external insurance provider or not insure themselves at all. This means that the renter is willing to be held liable in the case of any damages to the rental car and will pay out of pocket to remedy those damages. This can be done instead of having the insurance company or rental company cover the expenses from a charged insurance premium. 

The benefit of self-liability is that you get to keep your money if the car goes unscathed. Whereas a premium on insurance cannot be retrieved whether or not the car is damaged. 

However in the same vein, a major drawback is that should the car get damaged, the renter will be liable to the full extent of the damages from their own pocket. This can run into thousands and end up ruining your holiday in Iceland. 

Reykjavik is the capital of Iceland and the biggest city in Iceland

What is NOT covered in the car insurance for your rental car in Iceland?

Even though the CDW and SCDW insurance policies cover most probabilities of damage to the car, there are still some incidents not covered by them and some clauses to take note of. 

Policies and packages will not cover: 

  • Damage to the car caused by the negligence of the driver which includes drink-driving or driving under the influence of substances that impair the ability to handle a car, as well as damage resulting from test-driving or car racing.
  • Damage caused by revolution, riots, civil unrest, riots, and warfare. 
  • Damage caused by wildlife. 
  • Damage caused by driving into mountainous highlands, which could result in damage to the engine, transmission shaft, or any other parts of the vehicle.
  • Damage to the car caused by driving on prohibited areas e.g., banks of snow, watercourses, or trackless places.
  • Damage that affects only the suspension, wheels, glass, tires, batteries, and radio equipment. 
  • Damage caused by the theft of any parts of the vehicle.
  • Damage caused by driving on roads specially marked “F” on public maps.
  • Damage due to water. This, as well as damage to the bottom of the car, is not covered by any insurance policy. 
  • Damage due to sand, ash gravel, or any other earthy material. 
  • Damage caused by anyone other than the registered driver of the vehicle when renting will not be covered. If there will be more than one driver, ensure to register extra drivers at the point of renting. 
  • Any loss of property of the renter that occurs as a result of the car being stolen. 
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Is it ok to rely on the insurance provided by your credit card? 

You might decide to rely on the insurance provided by your credit card. However, you should only do so with full knowledge and understanding of the extent to which your credit card covers you. It’s important to consult your credit card company and have them explain to you the full extent of coverage they provide, before deciding to rely solely on them.

What should you do when you have car damage in Iceland? 

In case of medical emergencies, Iceland’s emergency number is 112. In case of vehicular breakdowns which do not constitute medical emergencies, you can find the steps to take depending on the nature of the emergency here

Rent a 4WD vehicle in iceland

Rental car coverage in Iceland

Including a coverage package in your Iceland car rental should be a non-negotiable. With different policies available you can pick the one that corresponds with the level of risk that you’re willing to take, but we’d always recommend being on the safe side and purchasing comprehensive coverage. 

For more information about renting a car in Iceland and tips for planning a road trip, you can read more of our articles here. You can also reach out to us if you have any questions at hertz@hertz.is. And always make sure to book your rental car online and in advance to ensure you get exactly the vehicle you want for your road trip in Iceland. 

Book your car in Iceland now with Hertz Iceland

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