I often rent a car on trips, I have always used credit card insurance and never have bought additional "at counter" insurance, and it's worked out.
Often some insurance is included in the base rate. This is especially true when using local brands (and not Hertz, Avis, Thrifty, etc.). I have called the credit card company in advance (I will again) but they always say the same thing: that it's only additional insurance that you have to waive when renting to qualify for credit card insurance, any insurance included in the base rate is acceptable. This sets up the rather ideal situation where you have insurance from the company but the deductible will be picked up for free by the credit card company, and things not often covered by CDW like glass, tires, or vandalism will be covered 100% by credit card insurance.
Looking to Iceland, I have never seen so many insurance categories. Here is the insurance information of a Blue Car Rental (a leading local brand).
Super CDW is included in the base rate, but is not that Super since it still has a deductible of 90,000 ISK (about $735). Does not include glass, headlights (?), wind damage to car doors (?), sand or ash damage (?), or the underside of the car. All of these will be covered 100% by the credit card insurance.
Gravel Protection: Included at 100% coverage except glass has a 15,000 ISK deductible (about $120). Nice to know that dings
caused by flying gravel are covered by the car insurance at 100%.
Theft covered at 100%
Sand and Ash Protection: An oddball, apparently related to rare sandstorms that occur on 2 parts of the Ring Road and can damage the paint job. There is no included coverage. For 8 days the coverage would be 12,000 ISK (about $100 to buy about a $735 deductible). Credit card insurance covers this at 100%. According to a TripAdvisor post, driving in sandstorms is to be avoided and can be avoided by checking weather forecasts for those stretches of the Ring Road where wind blown sand is a problem.
ADDING COVERAGE FOR ZERO DEDUCTIBLE:
30,320 ISK or about $250 (also about a 35% increase over basic insurance)
Mostly posting this to think it out clearly, still plan on using credit card insurance. Hertz is a little cheaper but the rental site in Reykjavik is a few miles out of center and includes no insurance.