ICELAND CAR RENTAL INSURANCE
Driving in Iceland is an unforgettable experience, but Iceland’s unique conditions also make car rental insurance essential. At Blue Car Rental, we offer comprehensive insurance options tailored to local road conditions, including protection from gravel, ash, and unpredictable weather. Below, you’ll find everything you need to make a confident, informed decision about your coverage.
Blue Car Rental insurance policy
At Blue Car Rental, we believe that clarity and honesty are key to a smooth rental experience. Insurance terms can often be confusing, but our goal is to make them simple and easy to understand. On this page, we break down exactly what each insurance covers and what it doesn’t. So, you can feel confident in your choices and avoid any unexpected surprises.
If you’re planning to use insurance coverage provided by your credit card and wish to opt out of our optional insurance packages, please contact us in advance. Our team will be happy to assist you and guide you through the process.
Insurances included in your rental
Every rental from Blue Car Rental includes the following insurances:
✅ Collision Damage Waiver (CDW) – Covers collision damage with a deductible
✅ Super Collision Damage Waiver (SCDW) – Already included in all rentals
✅ Gravel Protection (GP) – Covers damage to windshield, headlights, and paint caused by gravel
✅ Theft Protection (TP) – Covers vehicle theft
✅ Third-Party Liability Insurance – Required by Icelandic law
Optional Insurance Add-Ons
Blue Car Rental offers two optional insurance upgrades to provide extra protection and peace of mind:
✅ Sand and Ash Protection (SAAP) – Covers damage from volcanic ash and sandstorms, which can severely affect the paint, windows, and engine.
✅ Liability Waiver (LW) – Reduces your financial responsibility to zero in the event of damage. This package also includes SAAP automatically.
Collision Damage Waiver (CDW)
Collision Damage Waiver (CDW) is a standard insurance included in all Blue Car Rental bookings. It provides coverage for damage to the rental vehicle in the event of a collision. While CDW reduces your financial liability, it does not eliminate it completely.
By default, our rentals also include Super Collision Damage Waiver (SCDW), which lowers the excess (deductible) amount. However, if you request to have only the CDW insurance applied to your contract, the excess amount will be ISK 350,000.
Super Collision Damage Waiver (SCDW)
Super Collision Damage Waiver (SCDW) is included in all Blue Car Rental bookings to reduce your deductible in the event of a collision. It enhances the standard CDW by significantly lowering your financial responsibility.
Excess amounts with SCDW:
ISK 90,000 for small cars
ISK 120,000 for medium SUVs, large SUVs, and vans
Gravel Protection (GP)
The gravel protection is important insurance while renting a car in Iceland. Gravel are common around the whole island. When driving on gravel roads the small stones will leave chipped paint at the front of the bumper. Chipped paint damages are nothing to worry about and you will not be charged for them.
The gravel protection also covers the windscreen, headlights, and mirrors. The liability (excess) for broken windscreen, headlights, and mirrors is ISK 40,000
Theft Protection (TP)
Luckily Iceland is a very safe place and vehicle thefts are not very common. Though this is not common the car is always covered by insurance if it gets stolen. Theft protection has no liability (excess).
Keep in mind that TP does not cover items stolen within the vehicle
Third-Party Liability Insurance
Third-Party Liability Insurance is mandatory in Iceland and is automatically included with every Blue Car Rental vehicle. This insurance covers damage or injury that you may cause to other people, their property, or vehicles while driving. It does not cover damage to your own rental car, which is why CDW and SCDW are also included.
Sand and Ash Protection (SAAP)
The SAAP insurance was introduced because our standard insurance did not cover sand and ash damages. Sand damage is very common damage, especially when driving on the south coast. This can happen all year round.
Sand and ash damages are extremely costly and damage costs can range between 500.000 ISK and 1.500.000 ISK. Without the SAAP the cost for the damage is completely the renter’s responsibility.
The SAAP reduces the liability down to 90.000 ISK
The price per day is 1.850 ISK
Please note: Insurances can only be applied before the rental starts, not during the rental period.
Liability Waiver (LW)
All our customers can reduce their liability to zero by opting for our Liability Waiver. As many of our customers wanted to have a carefree experience while driving around Iceland, we introduced the Liability Waiver. This allows our renters to drive carefree with Blue Car Rental while enjoying our beautiful island.
The Liability Waiver reduces the liability amount for damages to zero. This includes damages covered by CDW/SCDW, GP, TP, Tire Protection and SAAP but also includes damages such as damage to the underside, wind blowing up the doors and water damages. This allows our renters to have a carefree experience with Blue Car Rental while enjoying our beautiful island.
Excluded are damages not covered by insurances as stated in Article 29 and 32 in the Rental Agreement and terms and conditions, for example intentional damages, damages caused by negligence or damages resulting from driving where prohibited.
Large: 5.800 ISK – Medium: 5.400 ISK - Small: 4.200 ISK
Please note: Insurances can only be applied before the rental starts, not during the rental period.
Compare All Insurance Options
| Insurance Type |
What It Covers |
Deductible |
Included? |
Optional Add-On |
| CDW |
Basic collision coverage |
ISK 350,000 |
✅ |
❌ |
| SCDW |
Reduced deductible from CDW |
ISK 90,000 / ISK 120,000 |
✅ |
❌ |
| GP – Gravel Protection |
Windshield, headlights, paint |
ISK 40,000 |
✅ |
❌ |
| SAAP – Sand & Ash Protection |
Paint, engine, electrical damage |
ISK 90,000 |
❌ |
✅ |
| TP – Theft Protection |
Theft of vehicle |
ISK 0 |
✅ |
❌ |
| Liability Waiver (LW) |
All of the above + 0 deductible |
ISK 0 |
❌ |
✅ |
Best Value: Our Liability Waiver (LW) gives you zero deductible coverage and includes SAAP for complete protection against Iceland’s most common road risks.
If you already have a booking you can view insurances and add on by Manage Booking.
Why you might need more than the basics insurances
Iceland’s roads and landscapes are stunning — but they can be rough on cars:
Gravel roads cause windshield and paint damage
Sandstorms and volcanic ash can lead to expensive engine or exterior repairs
Sudden weather changes can result in accidents even on paved roads
Real-life examples
A tourist cracks a windshield from flying gravel — ✅ GP covers it
A sandstorm peels off the paint on a 4x4 — ✅ SAAP covers it
The car gets dented or scratched — ✅ Liability waiver covers it
Choose Peace of Mind with Full Protection
Blue Car Rental’s Full Protection Package is designed to help you enjoy Iceland without worrying about unexpected damage or fees.
✔ 0 ISK deductible on all insurances
✔ Complete coverage for Iceland’s unique risks
✔ Save time and stress if the unexpected happens
Read more about Blue Car Rental zero worries policy.
Following damages are not covered by any insurances
- Damages caused by negligence or driving while intoxicated.
- Damages caused by off-road driving.
- Damages to the tires and service related to changing or repairing the tire.
- Only applies if the renter has not opted for the Liability Waiver and/or Roadside Assistance Waiver.
- Damages to the underside of the car.
- Only applies if the renter has not opted for the Liability Waiver insurance.
- Damages caused by driving into waters and rivers.
- Only applies if the renter has not opted for the Liability Waiver insurance.
- Damages caused to the clutch or other mechanical damages resulting from the renter’s negligence or misuse of the car.
- Damage caused when adding the wrong fuel type in the fuel tank of the vehicle or by adding fuel, water, oil, or other solvents in the wrong tank of the vehicle.
- Damages caused to the interior of the car.
- Damage caused by sand and ash storm. (only applies if the renter has not opted for the SAAP or the Liability Waiver insurance)
Following charges are not covered by any insurances
- Charges or other costs for required assistance because of a breakdown or damage that is the driver´s responsibility.
- Charges when adding the wrong fuel type in the fuel tank of the vehicle or by adding fuel, water, oil, or other solvents in the wrong tank of the vehicle.
- Charges for losing accessories, such as the car key or a GPS unit.
- Service charges and handling fees related to the renter’s use of the car, such as fines for speeding, parking fee, and tunnel fee.
- General charges for towing, resulting from the renter’s misuse or mistakes such as getting stuck in snow, sand, water, or river. (Please see full details listed on the backside of the rental agreement.)
- By purchasing Roadside Assistance Waiver any cost for the above-mentioned assistance is reduced to zero apart from service charges or handling fees related to speeding, parking violation or parking,- tunnel,- or other entrance fees. Keep in mind that the Roadside Assistance Waiver only covers service charges but never charges for the damages that the renter causes.
