Car Insurance in Iceland
Car insurance in Iceland includes mandatory third-party liability and optional comprehensive coverage. Four providers currently sell policies, with Verna's customers transferred to Vörður in early 2026.
How car insurance works in Iceland
Every registered vehicle in Iceland must carry mandatory insurance. If you are moving to Iceland and plan to buy a car or already own one, understanding car insurance in Iceland is one of the first things to sort out. The system has two layers: mandatory coverage required by law, and optional coverage that protects your own vehicle.
The system is straightforward once you know the parts. If you are planning your move to Iceland, getting insurance sorted is a practical early step.
Mandatory car insurance in Iceland
Icelandic law requires all registered vehicles to carry lögboðin trygging (mandatory vehicle insurance) under the Motor Insurance Act. You cannot register a vehicle or receive license plates without it.
Mandatory insurance has two components.
Third-party liability insurance (ábyrgðartrygging) covers damage your vehicle causes to other people and their property. If you cause an accident, this pays for the other driver’s vehicle repairs, medical costs for injured passengers or pedestrians, and damage to buildings or infrastructure. It does not cover damage to your own vehicle.
Driver and owner accident insurance (slysatrygging ökumanns og eiganda) compensates for personal injuries sustained by the driver who caused the accident, and injuries to the vehicle’s owner if they are a passenger. It does not cover injuries resulting from gross negligence or intentional acts.
Together, these two components protect everyone involved in an accident except your own vehicle. For that, you need optional coverage.
Optional coverage
Comprehensive insurance
Kaskótrygging (comprehensive or collision insurance) covers damage to your own vehicle. This includes collisions you cause, fire, theft, vandalism, and weather-related damage. Most providers also cover undercarriage damage and rock strikes.
Comprehensive insurance is not required by law, but it is strongly recommended for newer or financed vehicles. If you have an outstanding car loan, your lender will almost certainly require it.
You choose a deductible (eigin áhætta) when purchasing kaskó. A higher deductible means a lower annual premium. Deductibles commonly range from around ISK 100,000 to ISK 160,000 depending on the provider (as of March 2026).
Comprehensive coverage is valid in Iceland and throughout the EEA, the UK, and Switzerland for up to 90–92 days after departure (the exact period varies by provider). Whether theft abroad is covered depends on your provider.
Some include it within the valid coverage area, while others (such as TM) explicitly exclude theft and damage abroad. Check your policy terms before travelling.
Glass coverage
Bílrúðutrygging (glass or windshield insurance) covers the cost of replacing a cracked or shattered windshield, side window, or rear window. It does not cover scratches, glass sunroofs, or damage during installation.
Some providers bundle glass coverage with mandatory insurance by default. Sjóvá, for example, includes windshield insurance in their mandatory policy unless you specifically opt out.
Others offer it as a separate add-on. Vörður applies a 25% deductible on glass claims, with no deductible if the glass can be repaired rather than replaced.
Given Iceland’s gravel roads and winter driving conditions, glass coverage is worth considering. Windshield damage from flying gravel is common, especially on rural roads and the highland routes covered in our F-roads guide.
Car insurance providers in Iceland
Four insurance companies currently sell car insurance in Iceland (as of March 2026).
Provider | Website | Notable features |
|---|---|---|
Sjóvá | Stofn loyalty program with premium discounts for claim-free customers | |
TM | App-based comprehensive insurance inspections. Car financing via Lykill | |
VÍS | Ökuvísir usage-based insurance priced on driving behaviour | |
Vörður | Enhanced kaskó that includes undercarriage and tyre damage |
Verna stopped selling car insurance at the end of January 2026. All Verna policyholders were automatically transferred to Vörður on February 1, 2026, with comparable or better coverage terms. If you see Verna mentioned elsewhere online, their customers now belong to Vörður.
All four providers have English-language support and online portals where you can manage your policy, file claims, and request quotes.
What affects your car insurance premium
Several factors determine what you pay. The main ones are:
Vehicle type and value. A newer, more expensive car costs more to insure. Electric vehicles may have different pricing due to higher repair costs for battery and drivetrain components. See our electric cars guide for more on EV ownership in Iceland.
Your age and driving history. Younger drivers typically pay more. A clean claims history earns you a no-claims discount (bónus) that reduces your premium over time. Each provider calculates this differently, so ask about your bonus level when requesting a quote.
Where you live. Premiums can vary by region. Drivers in the capital area may face different rates than those in rural Iceland.
Vehicle use. A car used for personal transport costs less to insure than one used commercially or for ride-sharing. Add-ons like using the vehicle for racing or part-time rental increase the premium.
Deductible choice. For comprehensive insurance, choosing a higher deductible lowers your annual premium. This is the most direct lever you have for managing cost.
Usage-based insurance
VÍS offers a product called Ökuvísir that prices your insurance based on how you actually drive rather than traditional risk tables. You receive a small sensor tag that connects to your phone and scores each trip based on five factors: speeding, harsh acceleration, hard braking, swerving, and phone use while driving.
Your monthly payment is calculated from your driving score and distance driven. If you drive fewer than 500 km per month, the price drops further. VÍS removed age-based risk tables from this product, so younger drivers with careful habits are not penalised by their age alone.
Ökuvísir includes mandatory insurance and windshield coverage, with optional comprehensive insurance as an add-on. A 14-day free trial is available through the VÍS app.
How to get car insurance as a new resident
If you have just moved to Iceland and bought a car, here is the process:
Get your kennitala first. You need an Icelandic kennitala (national ID number) before any insurer can issue a policy.
Request quotes from multiple providers. All four companies offer online quote tools or virtual consultations. Premiums vary, so comparing at least two or three is worthwhile. Each provider’s website has an English-language quote process.
Choose your coverage level. Decide whether you need only mandatory insurance or want to add comprehensive and glass coverage. For a newer vehicle, comprehensive insurance is almost always worth it.
Activate your policy. Once you accept a quote, the policy takes effect immediately. You will need active mandatory insurance before the Icelandic Transport Authority (Samgöngustofa) will issue license plates.
Set up payment. Premiums can be paid monthly via credit card, direct bank debit, or in instalments. You do not need to pay the full annual premium upfront.
Transferring ownership and insurance
When you buy a used car, the seller must confirm that the vehicle’s insurance premium has been paid in full. If there is an unpaid premium from the previous owner, the insurer can demand payment from the new owner.
After registering the transfer of ownership with the Icelandic Transport Authority, contact your chosen insurer to set up a new policy in your name. If you already have a policy with the same company, they will cancel the old vehicle’s insurance and transfer your bonus to the new one.
Driving abroad with Icelandic insurance
Mandatory vehicle insurance is valid throughout the EEA and Switzerland. If you plan to drive your car in a non-EEA country that participates in the Green Card system, you need to request an international insurance card (green card) from your provider. There is no extra charge for the card itself.
Comprehensive insurance is also valid in the EEA, UK, and Switzerland for up to 90–92 days after departure (the exact period varies by provider) from Iceland. Whether theft abroad is included depends on your provider’s terms. If you plan an extended trip, ask your insurer about extending the coverage period and confirm exactly what is covered outside Iceland.
Foreign insurance in Iceland
If you are bringing a car from another EEA country, your existing mandatory insurance is valid in Iceland under the Green Card system. However, once you register the vehicle in Iceland (required if you become a resident), you must purchase Icelandic mandatory insurance.
For temporary stays, your home country’s insurance and a valid green card are sufficient. Converting your driving licence is a separate requirement that does not affect your insurance status.
Filing a claim
If you are involved in an accident, report the damage to your insurer as soon as possible. Most providers require notification within one year, but sooner is better.
For the damage report itself, the Icelandic car crash report site (Icelandic version: arekstur.is) provides a standardised form that both parties fill out at the scene. This is the same form used across all Icelandic insurers.
All four companies accept claims electronically through their online portals or apps. You will need your electronic ID (rafræn skilríki) or a two-factor authentication method to log in.
For serious property damage (fire, water damage, major collisions), contact your insurer’s emergency line immediately. Sjóvá’s emergency number is 440 2424. Check your policy documents for your provider’s equivalent.
Tips for getting the best deal
Compare annually. Car insurance in Iceland is a competitive market. Request new quotes from competing providers each year when your policy renews. This is the single most effective way to keep costs down.
Protect your no-claims bonus. Each claim-free year reduces your premium through your bonus. Small claims that barely exceed your deductible may not be worth filing if they reset your bonus.
Match your deductible to your risk tolerance. If you can comfortably cover ISK 150,000 out of pocket, a higher deductible will save you on annual premiums.
Drop comprehensive on older vehicles. Once your car’s market value drops close to the deductible amount, comprehensive insurance may cost more than it is worth. TM’s FAQ recommends evaluating this based on market value rather than model year alone.
Ask about loyalty discounts. Sjóvá’s Stofn loyalty programme gives claim-free customers a bonus discount on premiums. Other providers have similar programmes. Bundling home and car insurance with the same company often triggers additional savings.
For a broader picture of vehicle costs, see our guide to the cost of living in Iceland.
Frequently asked questions
Is car insurance mandatory in Iceland?
Yes. All registered vehicles must carry mandatory vehicle insurance (lögboðin trygging), which includes third-party liability and driver/owner accident coverage. You cannot get license plates without active car insurance in Iceland.
How much does car insurance cost in Iceland?
It depends on your vehicle, age, driving history, location, and coverage level. The most direct way to find out is to request quotes from the four active providers (Sjóvá, TM, VÍS, Vörður), all of which offer online quote tools in English. Choosing a higher deductible on comprehensive insurance and maintaining a claim-free record are the best ways to lower your premium.
What happens if I drive without insurance in Iceland?
Driving an uninsured vehicle is illegal. You risk fines and legal consequences, and you would be personally liable for all damage caused in an accident.
Can I use my foreign car insurance in Iceland?
If your vehicle is registered in another EEA country, your home insurance is valid for temporary use in Iceland. Once you register the vehicle in Iceland as a resident, you must purchase Icelandic mandatory insurance.
What happened to Verna insurance?
Verna stopped selling car insurance at the end of January 2026. All Verna policies were transferred to Vörður on February 1, 2026. Former Verna customers now manage their policies through Vörður’s portal.
Do I need comprehensive insurance?
It is not legally required, but it is strongly recommended for newer or financed vehicles. Your lender will likely require it if you have an outstanding car loan. For older vehicles with low market value, mandatory insurance alone may be sufficient.
Last updated: March 2026
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