Car Insurance in Iceland: A Comprehensive Overview

Legal Requirements

In Iceland, third-party liability insurance (Ábyrgðartrygging) is mandatory for all vehicles. This basic insurance covers damages or injuries caused to others in an accident but does not cover the policyholder's vehicle or personal injuries.

Additionally, drivers must carry accident insurance (Slysatrygging Ökufólks), which provides coverage for medical expenses and compensation for the driver and passengers in the event of an accident. Both these insurances are typically included when registering a vehicle.

Driving without these mandatory insurances is illegal and can result in fines, vehicle impoundment, or suspension of driving privileges.

Types of Car Insurance

Beyond

Car insurance in Iceland is an essential part of vehicle ownership and operation. Whether navigating the country’s urban areas or exploring its remote, rugged landscapes, having the right insurance ensures legal compliance and financial protection. This article provides an overview of the legal requirements, coverage options, and factors influencing car insurance in Iceland.

Legal Requirements

In Iceland, two types of car insurance are mandatory for all vehicle owners:

Third-Party Liability Insurance (Ábyrgðartrygging)

This is the minimum legal requirement and covers damages caused to other people’s property or injuries to third parties in an accident. It does not cover damages to your own vehicle.

Accident Insurance for the Driver and Passengers (Slysatrygging Ökufólks)

This insurance covers medical expenses and compensation for injuries to the driver and passengers involved in an accident, regardless of fault.

Both of these are typically included in the registration of a vehicle. Driving without this insurance is illegal and can result in significant fines or the suspension of your driving license.

Optional Coverage Options

In addition to the mandatory insurance, Icelandic insurers offer optional policies to provide more comprehensive protection:

Collision Damage Waiver (CDW)

Covers damage to your own vehicle in the event of an accident. A deductible usually applies, and the policy does not cover damages caused by reckless driving or negligence.

Theft Insurance

Provides coverage against vehicle theft, although Iceland has an exceptionally low crime rate, making this less common.

Gravel Protection

A unique offering in Iceland, this policy covers damages caused by flying gravel, which is a frequent risk on Icelandic roads, especially in rural and highland areas.

Sand and Ash Protection

Protects against damage caused by volcanic ash or sandstorms, a real concern in Iceland’s unique environment. Without this coverage, repair costs can be extremely high.

Roadside Assistance

Covers towing and assistance in case of breakdowns, which can be crucial when driving in remote areas.

Factors Influencing Premiums

Car insurance premiums in Iceland are influenced by several factors:

Vehicle Type: The make, model, and value of the car affect premiums, with higher rates for expensive or off-road vehicles.

Driver Profile: Age, driving experience, and claims history play a significant role in determining costs.

Usage: Vehicles used for commercial purposes or frequent long-distance travel may incur higher premiums.

Coverage Level: Opting for additional protections, such as gravel or sand and ash coverage, increases the overall cost.

For Tourists Renting Cars

Car rental companies in Iceland typically include basic third-party liability insurance and collision damage waivers. Tourists are advised to consider additional protections like gravel and sand/ash insurance, given the unique driving conditions. Carefully review the terms and exclusions of rental insurance policies to avoid unexpected costs.

Claims Process

In the event of an accident, follow these steps:

Document the Incident: Take photos, gather witness information, and record details of the accident.

Notify Authorities: Contact the police if the accident involves injuries, disputes, or significant property damage.

Report to the Insurer: File a claim with your insurance provider as soon as possible, providing all necessary documentation.

Tips for Choosing Car Insurance

Assess Your Needs: Evaluate the level of risk based on your vehicle and driving habits.

Compare Providers: Shop around for quotes and coverage options from local insurers.

Consider Environmental Risks: In Iceland, natural hazards like gravel and volcanic ash warrant special consideration.

Understand Policy Terms: Read the fine print to avoid surprises, especially concerning deductibles and exclusions.

Conclusion

Car insurance in Iceland is more than a legal requirement—it’s a vital tool for managing risks in a country with unique driving challenges. By understanding the mandatory requirements and optional coverage options, drivers can ensure comprehensive protection and enjoy the freedom to explore Iceland’s breathtaking landscapes with confidence.