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Generation Z, millennials most likely to buy travel insurance products

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

While nearly two-thirds, or 73%, of people are willing to pay extra for travel insurance or refundable booking options for their trips, Gen Z and millennials are far more willing (to 87% and 83% respectively) to pay extra. for travel protections compared to other generations, according to a Bank of America report. The bank surveyed 2,003 consumers in June.

“I think a lot of it depends on the lifestyle of different generations and where they travel,” said Mary Hines Droesch, head of consumer and small business products at Bank of America.

While Bank of America asked the question differently in an earlier similar report, the latest findings appear to represent an increase. When the bank surveyed 2,020 consumers about their saving and spending attitudes and behaviors in March 2022, 54% of those planning to travel said they would purchase travel protection, including 73% of Gen Z and 65% of millennial travelers.

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As younger generations may face tighter restrictions, from available free time to finances, they are avoiding risks wherever and whenever they can to ensure their travel plans go smoothly.

Why young travelers spend more on insuring their trips

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

“When (Gen Z) plans a trip, they’re really limited in the amount of time they’re away from work, and especially now when there’s so much pressure for people to return to the office,” he said. she declared.

By choosing to take out travel insurance, young people’s plans are better protected, Droesch added. Baby boomers “have other options (in case) things go wrong, because they don’t have the constraints of having to be in the office, at least three days a week,” she said.

About 20%, or 1 in 5 customers, on Hopper, who are typically Gen Z and millennial users, add the travel app’s Flight Disruption Guarantee product as a way to protect their trips, said Hayley Berg, an economist at Hopper.

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

Pandemic leaves jittery travel in its wake

Many travel plans were canceled during the Covid-19 pandemic and many disappointed buyers received no refunds, even if they had travel insurance, as unforeseen events such as the Covid lockdown- 19 were not covered. The experience left “a lasting impression on younger generations,” Droesch said.

With other countries now reopening to tourism due to relaxed or completely eliminated Covid restrictions, young American travelers don’t want to miss out on new experiences. However, given these lockdown memories and their limited disposable income, they are also insuring their trips so that if something unexpected happens, they can travel at a later date, Droesch said.

The travel industry also continues to experience higher rates of service interruption than before the pandemic, according to Berg at Hopper.

“Travelers are much more worried about being disrupted than they probably were four years ago,” she said. Additionally, in the face of a stubborn – albeit falling – inflation rate, “many families are tightening their belts,” Berg added.

These two generations are no longer just “young people,” so to speak, Berg said. Millennials are entering their 40s, and a large portion of Gen Z has graduated from college and is starting their careers.

“They are building their economic power and entering adulthood,” she added. “I think the trends we’re seeing in this demographic are ones I expect to see over the next 10 to 20 years.”

At this stage, the increased interest in travel protection products is not a passing phenomenon. Users who have travel protection products applied to Hopper are two to four times more likely to purchase the product for future trips, which is about 10% or $40 more per booking, Berg said.

“It has a cost, but we see a desire, and repetitive purchases are really there,” she added.

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

Traveling cheaper can mean less risk

Insurance or no insurance, choosing to travel when others are staying home can mean risking less of your hard-earned money. Traveling during a destination’s “shoulder seasons,” or the transition period between times most popular with travelers – such as spring and fall, which mark Europe’s peak summer season – is favorable because it is At that time the best deals are usually available, Berg said. .

“January, September and October are the cheapest months of the year to travel almost anywhere in the world and stay in hotels because it is back to school, (and) most Europeans have returned to work after their vacation summer in August,” she said.

Considering off-peak days for travel and hotel stays can help “reduce the cost of travel.”

To learn more about travel insurance, check out CNBC Select’s recent rankings on best travel insurance companies.

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