There aren’t really any ‘sandstorms’ frequent in Iceland. Iceland is however extremely windy, and sand and small pebbles can be blown onto your car and damage it if you are driving across sandy plains such as Sprengisandur in Iceland’s northern highlands, or the sand plains on Iceland’s South Coast.
If you would just be driving Snæfellsnes and Reykjanes peninsula you’d be fine, but if you’re driving the Ring Road you might feel better having a sand insurance for the sand plains below Vatnajökull glacier.
Basically, this is the only insurance that’s recommended for if you are driving the whole south coast of Iceland. 90% of the time you won’t have any problems, but you could be unlucky and then the insurance comes in handy.
Always make sure you always keep a big distance to cars in front of you (especially on gravel roads) as pebbles might shoot from underneath their tyres and hit your windshield and crack it.