Which insurance should you take when you hire a car?

At the rental desk in Keflavík they’ll list five combinations of letters and tell you that you need all of them. You don’t need them all, but some you really do.

The abbreviations

CDW Compulsory and included in the price. The excess is high (usually 250,000–350,000 ISK). SCDW Lowers the excess. Worth having; €15–20 a day. GP (Gravel Protection) Gravel damage: windscreen and headlights. Take it. The eastern part of the Ring Road and all the side roads are gravel. SAAP (Sand & Ash) Sand and ash storms. If you’re going to the south coast, definitely take it. A single storm can strip the car’s paint completely, with a bill of up to €6,000. TP (Theft Protection) Car theft in Iceland is statistically almost non-existent. Skip it.

Three things no insurance covers

1. Water damage. If the engine takes in water while you’re crossing a river, you pay, whatever package you bought. On F-roads this is a serious risk.
2. Door damage. A door caught by the wind is a standard exclusion in every policy.
3. Off-road driving. It’s illegal in Iceland with heavy fines, and the insurance is void.

Is credit card insurance enough?

Usually not. Most card policies exclude gravel and sand damage. In other words, the two most likely kinds of damage in Iceland. Read your card’s terms before you go.

Choosing a car

• Summer, Ring Road only: a small 2WD is enough.
• Summer, highlands (F-roads): a high-clearance 4×4 is required, and it must be explicitly allowed in the rental agreement.
• Winter, anywhere: a 4×4 with winter tyres. Studded tyres are legal from November to April.