Have insurance, will travel: Here's why millennials and Gen Z are paying for trip coverage

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Rome ranked second on a recent list of best travel destinations for a digital detox.

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

While almost two-thirds, or 73%, of people are willing to pay extra fees for travel insurance or refundable booking options for their trips, Gen Zers and millennials are far more willing — at 87% and 83%, respectively — to pay extra for travel protections compared with other generations, according to a report by Bank of America. The Bank of America surveyed 2,003 customers in June.

“I think it’s a lot to do with the lifestyle of different generations and the places they travel,” said Mary Hines Droesch. While Bank of America asked the same question in a previous report, this latest one seems to indicate an increase. When the bank surveyed 2,020 consumers about their savings and spending attitudes and behaviors in March 2022, 54% of those who planned to travel said they would purchase trip protection, including 73% of Gen Z and 65% of millennial travelers.

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Since younger generations may face tighter restrictions, from available free time to finances, they avoid risk where and when they can to ensure their travel plans go smoothly.

Why younger travelers spend more insuring trips

Many baby boomers are retired and enjoy a degree of flexibility when it comes to travel. Bank of America’s report shows that they are more likely to choose non-peak travel days (60%), or drive to their destination (54%), than fly. That’s less true for Gen Z, said Droesch.

“When

plan a trip, they’re really limited to the time that they’ve taken off from work, and especially now that there’s such a push for people to return to the office,” she said.[Gen Z]By opting to buy travel insurance, younger people’s plans are more protected, added Droesch. Boomers “have other options

things go awry, because they don’t have the constraints of having to be at the office, at the very least, three days a week,” she said.[in case]Roughly 20%, or 1 in 5, of customers on Hopper who generally tend to be Gen Z and millennial users, are adding the travel app’s flight disruption guarantee product as a way to protect their trips, said Hayley Berg, an economist at Hopper.

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

Pandemic leaves travel jitters in wake

Many travel plans were canceled during the Covid-19 pandemic and many disappointed buyers got no refunds, even if they had travel insurance because unforeseen events such as the Covid-19 lockdown weren’t covered. Droesch said that the experience had a lasting impact on younger generations.

With Covid restrictions in other countries being relaxed or eliminated, younger U.S. tourists don’t wish to miss new experiences. Droesch said that because of their lockdown memories, and limited income, many are also insuring travel so they can travel later if the unexpected occurs. “Travelers worry more about disruptions than they did four years ago,” Berg said. Berg said that families were also tightening the belt due to a persistent, if falling, inflation rate. The Millennials have entered their 40s and Gen Z has graduated from college and is starting to build their career. She added, “They are gaining economic power and entering adulthood.” “I think that the trends we see within this demographic will be the trends I anticipate for the next 10-20 years. “

At this point, the increased interest in travel-protection products is not an ephemeral phenomenon. Berg said that users who purchased travel protection products through Hopper were two to four time more likely to buy the product on future trips. This adds up to about 10%, or $40, per booking. “It’s expensive, but the willingness to buy is there,” Berg said. Cancel for Any Reason plans, for example, allow you to cancel a flight for whatever reason, and receive a full refund. However, such coverage can add up to 50% or more on top of actual costs.

Traveling for less can mean risking less

Insurance or no insurance, opting to travel when others are staying home can mean risking less hard-earned money. Berg recommends traveling during the “shoulder season” of a destination, or the period in between the peak travel seasons. For example, spring and fall are the two months that bookend Europe’s summer high season.

“January, September and October are the cheapest months of the year to travel pretty much anywhere in the world and to stay in hotels because it’s back to school,

most of Europe has gone back to work after their summer holidays in August,” she said.

Considering off-peak days for travel and hotel stays can help “chip away the cost of the trip. “

For more on travel insurance, check out CNBC Select’s recent ranking on the

best travel insurance companies

.