CAR RENTAL INSURANCE ICELAND

At Saga Car Rental Iceland, we know Iceland's roads can be demanding. Loose gravel, unpredictable weather, and remote stretches all carry a degree of risk, and a small incident can quickly become costly.

That is why we offer three clear insurance options to suit every traveler and budget. Browse our packages below and choose the coverage that lets you explore Iceland with peace of mind.

Protection Packages

Coverage	Basic	Silver	Gold
Excess Liability	€3,500	€1,000	€0
Gravel Protection Liability	€1,000	€250	€0
Collision damage waiver	✅	✅	✅
Third Party Liability	✅	✅	✅
Unlimited mileage	✅	✅	✅
Theft protection	✅	✅	✅
Super Collision Damage Waiver	✅	✅	✅
Zero Excess Insurance	❌	❌	✅
Debit card accepted	❌	❌	✅
Sand and Ash Protection	❌	❌	✅
Tire Insurance	❌	❌	✅

Choosing the Right Insurance Package

Selecting the right insurance package is essential for a safe and stress-free journey in Iceland. The best coverage depends on your travel plans, the season, and the roads you’ll drive. Use the guide below to match your insurance to your itinerary and risk level.

1. Match Insurance to Your Itinerary

Your Route	Road Types	Recommended Coverage	Why?
Reykjavik, Golden Circle, Main Ring Road	Paved	Basic	Low-risk areas with well-maintained roads; basic protection is usually sufficient
South Coast, North Iceland, Westfjords	Paved & Gravel	Silver or Gold	Higher exposure to loose gravel, strong winds, and sudden weather changes
Highlands, F-roads, Remote Areas	Gravel, F-roads	Gold	Rough terrain, river crossings, and increased risk of undercarriage and body damage

Key points:

Urban & main tourist routes: Basic protection is usually sufficient.
Remote, gravel, or highland routes: Choose Gold Protection for more coverage

2. Consider Seasonal Risks

Spring (Apr–Jun): Sand and ash storms are common, especially in the south.
Winter (Oct–Mar): Increased risk of ice and snow.
Summer (Jul–Sep): Milder, but gravel and highland roads still require extra protection.

3. Compare Insurance Packages

Insurance Package	What It Adds Over Previous Tier	Excess / Deductible
Basic	Base coverage: collision, theft, third party liability)	€3,500
Silver	Windshield / Glass, lower excess	€1000 / €250
Gold	Sand & Ash Protection, Tire insurance	€0

4. How to Choose

Step 1: Map your route and note if you’ll drive on F-roads or in the highlands.
Step 2: Consider the season and likely road conditions.
Step 3: Choose Basic or Silver Protection for well-traveled routes, or Gold for remote, gravel, or highland travel.

Collision Damage Waiver - Included

Collision Damage Waiver (CDW) is included in your rental and provides essential protection for the vehicle during your rental period. It covers damage to the rental car’s body caused by accidents, as well as theft of the vehicle.

This also includes Theft Protection (TP) and Third Party Liability (TPL). Theft Protection covers the loss of the rental vehicle if it is stolen. Third Party Liability provides coverage for damage or injury you may cause to other people or their property while driving the rental car.

A payment card in the driver’s name must be presented at pickup to confirm the rental agreement. No deposit is required when renting with us.

Super Collision Damage Waiver - Included

Super Collision Damage Waiver (SCDW) adds extra protection to your rental, designed for the real driving conditions in Iceland.

It builds on the basic protection already included: Collision Damage Waiver (CDW), Theft Protection (TP), and Third Party Liability (TPL)—and adds essential coverage for the parts of the car most exposed to everyday risks: the windshield, tyres and wheels, and gravel damage to the bodywork.

Even careful drivers often encounter loose gravel, strong winds, or rough surfaces outside main roads. SCDW helps you stay protected against these common, unexpected events.

Sand and Ash Protection

Sand and Ash Protection (SAAP) is your defense against one of Iceland's most unpredictable hazards. Iceland's volcanic landscape means sand and ash storms can occur with little warning, causing damage that standard insurance does not cover.

With SAAP in place, you can explore Iceland's stunning scenery without worrying about what the elements might throw at you. This protection is included as standard in our Gold insurance package, giving you one less thing to think about on the road.

Roadside Assistance Waiver (RAW)

Presenting our Roadside Assistance Waiver (RAW), a complete safeguard for your car rental experience, providing you with peace of mind while navigating the open roads. This essential addition guarantees that if you find yourself in need of roadside assistance during your rental period, you won't be burdened with any associated costs. Armed with this waiver, embark on your journey with assurance, secure in the knowledge that you're shielded from unexpected challenges on the road ahead. Embrace worry-free travels and optimize your rental with our Roadside Assistance Waiver.

Real-Life Examples: How Insurance Applies in Iceland

Understanding how car rental insurance works in actual situations can help you make confident, informed decisions. Here are practical scenarios travelers often face in Iceland, showing how different types of insurance can protect you—or where they may fall short.

Common Real-Life Incidents and How Insurance Applies

Gravel Damage on the Ring Road

While driving along the Ring Road, a passing car kicks up loose gravel, chipping your windshield and scratching the paint.
With Gravel Protection (GP): The repair costs for the windshield and paint are covered, leaving you with minimal or zero out-of-pocket expenses (depending on your package).
Without GP: You are responsible for the full cost of repairs, which can be substantial.

Sand and Ash Storm on the South Coast

A sudden sandstorm peels paint from your car and scratches the windows while you’re parked near Vik.
With Sand and Ash Protection (SAAP): The cost of repairing sand and ash damage is covered, reducing or eliminating your liability.
Without SAAP: You may face a repair bill of up to €10,000, as this type of damage is often excluded from basic insurance.

Wind Damage to Car Doors

You stop at a scenic overlook, open your door, and a strong gust of wind flings it open, bending the hinges or damaging the bodywork. This is one of the most common accidents in Iceland, and repairs can be extremely costly.

Please note that wind damage is not covered by any of our insurance packages, so always take extra care when opening car doors in windy conditions, especially at exposed viewpoints and coastal areas.

Flat Tire on a Remote Road

While exploring gravel roads in the Westfjords, you get a flat tire.
With the Gold Package: The cost of tire repair or replacement is covered, and roadside assistance can help you get back on the road.
Without this coverage: You are responsible for the repair, towing, and any related delays.

Minor Collision in Reykjavik

You accidentally bump another car while parking in Reykjavik, causing minor dents.
With Collision Damage Waiver (CDW/SCDW): Your liability is limited to your deductible or excess.
Without CDW: You are responsible for the full cost of repairs.

Theft or Break-In

Your rental car is stolen overnight in Reykjavik, or someone breaks a window to steal your bag.
With Theft Protection (TP): The loss of the vehicle is covered, but personal belongings are not.
Travel insurance is needed for personal items.

Water Damage from River Crossing

Attempting to cross a river on an F-road might look straightforward, but water can enter the engine and cause serious and irreversible damage in seconds. River crossings are one of the most dangerous and costly mistakes a driver can make in Iceland.

Please be aware that water damage is not covered by any of our insurance packages, so always assess river crossings carefully and never attempt one if you are unsure.

What Happens Next? The Claims Process in Action

If you experience damage or an incident:

Document the damage with photos and notes.
Report the incident to Saga Car Rental as soon as possible.
The company will assess the damage and determine coverage based on your insurance package.
You pay up to your deductible (if applicable); insurance covers the rest.
If using a third-party insurer, you may pay the rental company first and then submit a claim for reimbursement.

Lessons from Travelers

Travelers have shared both positive and challenging experiences with insurance in Iceland. For example:

Daniel Fischer: I just wanted to say thank you for how smoothly everything was handled when we got a flat tire on the South Coast. We were expecting delays and extra costs, but your team made it incredibly easy. The guidance to the nearest repair shop and the fact that we didn’t have to deal with upfront payment made a huge difference. It really took the stress out of the situation, and we could just continue enjoying our trip.
Emily Carter: Just a quick note to say I’m really glad we chose the gravel protection. When that stone hit the windshield, I honestly thought we’d end up paying a lot for it. But everything was handled exactly as you explained — no surprises, no hassle. It made the whole experience feel straightforward, even when something went wrong. Definitely appreciated.
Luca Moretti: I wanted to share our experience after driving through a sandstorm in the highlands. It was a bit intense, and afterwards we noticed damage to the car’s paint. We were concerned at first, but thanks to the sand and ash protection, everything was taken care of without any issues. It gave us real peace of mind in such unpredictable conditions, and we’re very grateful for that.

Peace of Mind Through Preparation

Seeing how insurance works in real-life situations helps you understand its true value. By matching your coverage to your planned activities and the risks you’re likely to face, you can travel with confidence—ready for whatever Iceland’s roads bring your way.

Rental Car Insurance FAQs

Does my personal car insurance cover a rental car?

Sometimes. Some personal car insurance policies and credit cards extend coverage to rental cars, but many do not cover rentals in Iceland or exclude certain types of damage. Even when coverage applies, it may not include risks common in Iceland such as gravel damage, sand and ash damage, or strong winds. Always check with your insurer before relying on personal coverage.

Do I need rental car insurance in Iceland?

Yes, rental car insurance is strongly recommended in Iceland. While all rental cars include basic Collision Damage Waiver (CDW), it usually comes with a high deductible. Iceland’s roads, weather, gravel surfaces, and volcanic sand can increase the risk of damage, so many travelers choose additional protection to reduce their financial liability.

What happens if you damage a rental car in Iceland?

If a rental car is damaged in Iceland, you may be responsible for the deductible listed in your rental agreement. Basic insurance such as CDW limits your liability, but you still pay up to the deductible amount unless you purchased additional coverage. Always report the damage to the rental company and document the incident.

What insurance is included with my Saga Car Rental booking?

All Saga Car Rental bookings include mandatory insurance, such as Collision Damage Waiver (CDW) and third-party liability coverage. CDW limits your financial responsibility if the car is damaged, but a deductible still applies. Optional protections may be available to reduce the deductible and provide additional coverage.

What is the deductible on a rental car in Iceland?

The deductible is the maximum amount you must pay if the rental car is damaged. In Iceland, deductibles with basic Collision Damage Waiver (CDW) is €3.500 with Saga Car Rental. Higher insurance can reduce this amount significantly.

Is gravel protection necessary?

Gravel protection is highly recommended when driving in Iceland, as loose stones are a common hazard on Icelandic roads and can cause windshield or paint damage before you even notice.

At Saga Car Rental Iceland, all three of our insurance packages include gravel protection. The excess varies depending on your chosen package: Basic carries a 1,000€ excess, Silver reduces this to 250€, and Gold covers you with zero excess.

Are F-roads and highland routes covered by insurance?

Traveling on F-roads and in the Highlands requires a 4x4 vehicle. These roads are rough, unpaved, and can include river crossings and challenging terrain that a standard car simply cannot handle.

Please note that water damage and undercarriage damage are not covered by any of our insurance packages, regardless of which tier you choose. Always plan your route carefully, check road conditions before setting off, and never attempt a river crossing if you are unsure. Being prepared is the best protection on Iceland's highland roads.

Can I add or change insurance after picking up the car?

You can select or change your insurance package at the time of booking or when you pick up your vehicle. Once you have set off, however, changes to your coverage are no longer possible, so make sure you are happy with your chosen package before you drive away.

What happens if my personal belongings are stolen from the rental car?

Theft Protection (TP) covers the vehicle itself, not personal belongings. Consider travel insurance for coverage of personal items.

Is it possible to rent a car without any insurance?

All rentals in Iceland must include basic insurance by law. You may decline additional coverage if you have alternative protection, but you will be liable for the full deductible if damage occurs.