Yes, many a transistor has been destroyed by inductive spikes.
You can use a zener from the collector to ground but it should have a breakdown voltage greater than the supply voltage or it will conduct all the time (if you check D1's current in your simulation you will see this).
For your simulation it should have a breakdown greater than 5V.
Alternately you can put a standard diode across the inductor (cathode to supply side). This will provide a path for the inductor current when the transistor turns off and prevent any spike.