Final answer:
Insurance is a common risk transfer method where individuals pay premiums in exchange for financial protection against significant losses from covered events. Moral hazard may occur because insured individuals might engage in riskier behavior knowing they have coverage.
Step-by-step explanation:
A common method of risk transfer that nearly everyone uses is insurance. Insurance is a method of protecting a person from financial loss by having policyholders make regular payments, known as premiums, to an insurance entity. In return, the insurance company provides a money-back guarantee of sorts by compensating members who suffer significant financial damage from an event covered by the policy. It's essential to recognize 'moral hazard', a situation where insured individuals may take greater risks because they have protection against those risks.