Gen Z, millennials buy the most travel insurance products

Despite inflation, Gen Z and millennials are determined to travel this summer, even if it means spending a little more.

While almost two-thirds or 73% of people are willing to pay extra for travel insurance or refundable booking options for their travel, Gen Zers and millennials are more willing to pay extra – 87% and 83% respectively For travel protection compared to other generations, according to a report by Bank of America. The bank conducted a survey among 2,003 consumers in June.

“I think a lot of it has to do with the way different generations live and where they travel,” said Mary Hines Droesch, head of consumer and small business products at Bank of America.

Although Bank of America put the question differently in a previous similar report, the latest findings represent an uptick. When the bank surveyed 2,000 consumers in March 2022 about their savings and spending attitudes and behaviors, 54% of those planning to travel, including 73% of Gen Z and 65% of millennial travelers, said they would buy travel protection.

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As younger generations may face tighter constraints, from leisure time to finances, they are risk-averse when and where to ensure their travel plans go smoothly.

Many baby boomers are retired and have a certain level of comfort when it comes to travel. For example, according to a Bank of America report, they are the most likely cohort to travel on off-peak days (60%) or drive to a destination instead of flying (54%). That’s less true for Gen Z, Droesch said.

“When (Gen Z) plans a trip, they’re really limited by the time they leave work, and especially now there’s such a push to get people back into the office,” he said.

By opting to buy travel insurance, young people’s plans are more protected, Droesch added. Boomers “have other options if things go wrong because they’re not restricted to being in the office at least three days a week,” he said.

Hopper economist Hayley Berg said about 20% of Hopper customers, or 1 in 5, tend to be Gen Z and millennial users in general, adding the travel app’s flight disruption guarantee product to protect their trips.

“It’s very popular with travelers, especially those who are worried about all the disruptions that are in the news right now,” Berg said.

Many travel plans were canceled during the Covid-19 pandemic, and many disappointed buyers did not receive any refunds even if they had travel insurance because unforeseen events such as the Covid-19 lockdown were not covered. The experience “made a lasting impression on younger generations,” Droesch said.

As other countries now reopen for tourism due to relaxed or completely lifted Covid restrictions, young US travelers don’t want to miss out on new experiences. However, given these lock-in memories and limited disposable income, they insure trips so they can travel later if the unexpected happens, Droesch said.

According to Hopper’s Berg, the travel sector is still experiencing higher service disruptions than it did before the pandemic.

“Travelers are more concerned than they were four years ago,” he said. In addition, despite falling inflation, “a lot of families are tightening their belts,” Berg said.

Berg said that these two generations are not just “young people” anymore. Millennials are turning 40 and many of Generation Z are graduating college and starting their careers.

“They are building economic power and have entered adulthood,” he said. “I think the trends we’re seeing in this demographic are the trends I expect to see over the next 10 to 20 years.”

In this regard, the increased interest in travel protection products is not a passing phenomenon. Users who apply travel protection products on Hopper are two to four times more likely to purchase the product for future trips, which adds about 10% or $40 per order.

“It’s expensive, but we’re seeing the readiness and the repeat purchases are really there,” he said.

Although travel insurance may sound like a good idea, travelers should be aware of the different types of travel insurance available and be sure which type they are purchasing. For example, you can cancel a flight for any reason and get a full refund through the Cancel for Any Reason or CFAR plans. However, such coverage can add 50% or more to the actual cost.

Insurance or no insurance, choosing to travel while others stay home can mean risking less hard-earned money. A destination’s “shoulder seasons,” or transition periods between the most popular times with travelers — such as spring and fall, which bookend Europe’s summer high season — are favorable because the best deals are usually available then, Berg said. .

“January, September and October are the cheapest months of the year to travel and stay in hotels almost anywhere in the world because it’s back to school, (and) most of Europe is back to work after the summer holidays in August,” he said.

Factoring in off-peak days for travel and hotel stays can help “cut travel costs.”

For more on travel insurance, check out CNBC Select’s latest rankings best travel insurance companies.