Travel Insurance for an Iceland Vacation (2023)

Iceland does not require travel insurance for tourists from the US Your passport allows for a stay of up to 90 days without a visa. This requirement also applies to other nearby Schengen countries like Denmark and Sweden. Residents of certain countries may require a Schengen visa to enter the Schengen area.

Even though some airlines offer low-cost flights to Iceland, travel still requires a significant investment. Cancellations can occur due to many reasons and without trip cancellation coverage, you may not be able to recover money spent on air tickets and hotel reservations.

While not required to travel, the US State Department recommends health insurance coverage for visiting Iceland tourists. Many standard policies in the US, including Medicare, do not cover overseas medical expenses. If you have private health insurance, check with your provider to see if you have coverage abroad.

Iceland’s health care system has ranked among the top countries nationwide, but treatment facilities may require full payment upon discharge. The country’s average health care costs are over $6,000 per year, so a single injury or accident could exponentially increase your trip costs.

Even though Iceland has excellent infrastructure, the adventure activities that draw many visitors carry a risk of injury. If you buy travel insurance, you can enjoy your trip without having to worry about medical coverage. But keep in mind that international travel insurance policies may not cover injuries related to extreme sports, such as skydiving.

Travel insurance plans can also prevent other potential problems, such as lost baggage, from interrupting your itinerary. Here are the five types of coverage to consider for your Iceland holiday.

Cancel for Any Reason Coverage

A travel insurance policy with cancel for any reason (CFAR) coverage allows you more flexibility in canceling prepaid, non-refundable trip expenses. This type of insurance is valuable because standard policies typically only offer reimbursement if your trip gets canceled for reasons beyond your control, such as hospitalization or family death.

However, CFAR coverage allows you more flexibility in being able to cancel your trip for reasons like scheduling conflicts, changes in plans or financial issues. Most providers offer CFAR coverage as a policy add-on, which will increase your premium. Even though higher premiums may make this insurance too expensive for some travelers it is unlikely to change their minds, it can add peace of mind for those booking their Iceland getaway well in advance.

Gear Theft Protection

Comprehensive travel insurance coverage includes emergency medical costs, trip cancellations, lost baggage and gear theft insurance. Some providers may offer gear protection as a policy add-on. However, insurance providers often set low maximum payouts for lost gear. Low coverage limits may stop you from receiving full compensation for a stolen or damaged item if you have valuable devices, such as a smartphone, camera, laptop or other smart gadgets.

Additional gear theft protection may be necessary to cover highly valuable items. You can also consider gear insurance if you plan to bring your own skis, cycle or other sporting gear to Iceland.

Theft is relatively rare in Iceland, with only 3,500 cases reported in the entire country in 2020. You can weigh the country’s low crime rate when deciding whether or not to invest in additional gear protection, but keep in mind that uncontrollable gear damage may still occur .

Medical Emergency Insurance and Emergency Medical Evacuation

One of the primary reasons to purchase insurance for an Iceland trip is to avoid out-of-pocket medical costs. Travel medical insurance can pay for emergency care and, in most cases, cover evacuation back to the US if you require more intensive care at home.

The US State Department advises travelers to purchase travel health coverage. The embassy in Iceland can help you locate a hospital or clinic service, but it will not pay any medical costs.

You can contact your US-based insurance provider to see if it covers overseas costs. If you have a European Health Insurance Card (EHIC), you may not get coverage as Iceland is outside the European Union (EU).

Medical emergency and evacuation coverage are typically available with single-trip policies. However, if you travel internationally more than once or twice per year, an annual multi-trip option could provide a better value overall.

Rental Car Protection

Iceland requires third-party liability insurance for all drivers renting a car. This coverage is usually included in the rental fee and pays for damage, injuries or accidents you cause while operating a rental vehicle.

Rental car companies may also offer collision damage waiver insurance to pay for damage to a rented vehicle. Most standard policies have a deductible unless you opt for a “super” or “premium” policy. In Iceland, collision coverage may not extend to certain issues, such as water damage or dents from driving off-road or on gravel. These may require extra insurance.

You can also opt for a travel insurance policy for additional rental car coverage. Policies may cover collision-related damage at a cheaper cost than insurance offered by a rental car company.

US-based insurers may cover rental cars for policyholders, but this perk rarely extends overseas. However, some premium credit cards offer rental car insurance and can replace a travel insurance policy. You should verify coverage and amounts before considering this option.

Trip Cancellation Insurance

Trip cancellation insurance pays for pre-booked portions of your Iceland vacation if travel gets canceled due to circumstances beyond your control. Most standard travel insurance covers cancellations due to the following:

  • Serious accidents or illness
  • Death of an immediate family member
  • Acts of domestic or international terrorism
  • Jury duty or other legal obligations
  • Military deployments

Trip insurance will not pay out if you cannot prove the cancellation was caused by a covered event. Check your policy documents for a complete list of covered cancellations.

An insurance company will usually package cancellation coverage with trip interruption protection. This insurance covers costs associated with a delay after your journey begins. Iceland commonly experiences volcanic eruptions, and the ash from these events can land commercial flights. Therefore, interruption coverage is always a good idea when visiting Iceland.

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