How to Choose the Right Insurance for Your Iceland Car Rental

Your Journey, Your Peace of Mind

With Höldur, your Icelandic adventure begins the moment you collect your keys. From Reykjavík’s colourful streets to the rugged roads of the Highlands, the right car and the right insurance protection make every journey smooth, safe, and unforgettable.

Iceland’s conditions are unlike anywhere else in the world: volcanic ash storms, gravel roads, sudden winds, and ever-changing weather. That’s why we have designed a clear, comprehensive suite of insurance options—tailored specifically to Iceland’s driving environment. By choosing the right protection, you can focus on enjoying the beauty of waterfalls, glaciers, and lava fields, knowing that you and your rental vehicle are well covered.

This guide explains our insurance offerings, what they cover, and how to select the right package for your plans—whether you’re collecting your vehicle at Keflavík International Airport (KEF) or one of our convenient rental stations across Iceland.

Why Insurance Matters When Driving in Iceland

Iceland’s natural beauty comes with driving challenges you may not encounter elsewhere:

• Gravel roads and loose stones can damage windscreens and paintwork.

• Volcanic ash and sandstorms can cause extensive abrasion to car exteriors.

• Unpredictable weather means strong winds, snow, and icy roads.

• Remote locations make roadside support essential.

Höldur’s insurance packages directly address these conditions. With the right cover in place, you won’t be distracted by worries about potential costs—you’ll simply enjoy the freedom of the open road.

Comprehensive Insurance and Protection Packages

At Höldur, transparency matters. Every customer deserves clear information about what’s included, what’s optional, and what’s not covered. Here’s an overview of your choices:

Third-Party Liability Insurance (Mandatory by Law)

All Höldur rentals automatically include third-party liability insurance, as required in Iceland. This covers damage you may cause to another person’s vehicle or property. There’s no additional charge—it’s built in for your peace of mind.

Collision Damage Waiver (CDW): Standard Protection

Every Höldur rental includes Collision Damage Waiver (CDW) as standard. CDW limits your financial liability for accidental damage to your rental car.

• Excess (self-risk): ISK 250,000 for passenger cars / ISK 450,000 for SUVs and 4x4s.

• This means that, in the event of a covered incident, the maximum you would pay towards repairs is the excess amount.

This essential cover is a strong foundation for all rentals, whether you’re staying in Reykjavík or driving the Ring Road.

Theft Protection (TP): Automatically Included

While vehicle theft is very rare in Iceland, Höldur includes Theft Protection (TP) at no extra cost. This safeguards you in the unlikely event of theft or attempted theft during your hire period.

Upgrading for Greater Peace of Mind: Medium & Premium Packages

For many travellers, upgrading beyond the standard cover is a wise choice. Höldur offers two levels of enhanced protection—Medium and Premium—each designed to address Iceland’s unique road conditions.

 

 

What’s Not Included in the Insurance Packages

Even with comprehensive coverage, certain exclusions apply. To avoid surprises, it’s important to know these limitations:

• River Crossings and Water Damage: Driving into rivers, lakes, or deep water is not covered.

• Off-Road Driving: Insurance is void if vehicles are driven outside marked roads or tracks.

• Negligence or Reckless Driving: Damage caused by intoxication, carelessness, or intentional acts is excluded.

• Tyres, Undercarriage, and Interior: Such damages are not covered by any insurance.

• Lost Keys or Documents: Costs for replacing keys, plates, or documents are the renter’s responsibility.

For complete details, always review the insurance terms stated in the rental agreement at the time of booking.

• See also our guide to vehicle cover.

Tailoring Your Protection to Your Journey

Höldur makes it easy to customise your insurance:

• During Booking: Add Medium or Premium protection package online when reserving your vehicle.

• At Pickup: Our friendly team at KEF, Reykjavík, or other stations can guide you through options.

• During Rental: Upgrades may be possible, subject to approval and availability.

Recommendations Based on Travel Plans:

• City & Ring Road Trips (Reykjavík, Golden Circle, Akureyri): CDW may be enough, but SCDW and GP is strongly advised (Medium Protection Package).

• Highlands & Remote Areas: SCDW, GP, SADW, and ZERO together provide the best protection (Premium Protection Package).

• Seasonal Considerations:

  • Summer: Gravel is common—add at least GP.

  • Autumn/Winter: Ashstorms and wind are frequent—consider SADW.

Why Travellers Choose Höldur for Car Hire in Iceland

• Transparent Pricing: All excesses and terms are clear—no hidden surprises.

• 24/7 Roadside Assistance: Every rental includes round-the-clock support.

• Friendly Local Expertise: Our team knows Iceland’s roads and can advise on the best protection for your trip.

• Sustainability Commitment: Our policies and fleet align with eco-friendly practices, supporting responsible travel.

Höldur Car Hire Insurance FAQs

What insurance is automatically included?

All rentals include third-party liability, CDW, and theft protection. This ensures you meet Icelandic legal requirements and provides a base level of cover.

Can I reduce my excess liability?

Yes—adding SCDW significantly lowers your financial responsibility in case of damage (to ISK 60,000 for cars / ISK 110,000 for SUVs).

Do I really need Gravel Protection in Iceland?

Yes. With so many gravel roads, the risk of damage is high. GP is affordable and covers windscreens, headlights, and paintwork.

What is Sand and Ash Protection (SADW), and do I need it?

SADW protects against abrasive damage caused by volcanic ash or sandstorms, which can be extremely costly. It’s strongly recommended if you’re travelling in South Iceland or near volcanoes.

Does Höldur’s insurance cover tyres or the undercarriage?

Damage to tires or the vehicle's undercarriage is not covered by any protection.

Can I add or upgrade insurance at Keflavík Airport (KEF)?

Yes. You can add upgrades at pickup in KEF, Reykjavík, or other stations. Our staff will help you choose the right cover for your plans.

Conclusion: Drive Iceland Safely with Höldur

Choosing the right insurance is about more than just ticking boxes—it’s about empowering your Icelandic adventure. With Höldur, you’ll enjoy clear options, local expertise, and the reassurance that your car hire is as safe as it is reliable.

Whether you’re cruising Reykjavík’s streets, chasing waterfalls on the Golden Circle, or braving the winds of the South Coast, we’ve got the right cover for you. Book your Höldur car rental today, select the insurance package that suits your plans, and set off with confidence—knowing Iceland’s beauty awaits, and we’ll be right there with you, every mile of the way.

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